Uganda - Agricultural Rehabilitation Project : Credit 1328 - Project Agreement - Conformed

CREDIT NUMBER 1328 UG DCU M E NTS Project Agreement (Agricultural Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and UGANDA COMMERCIAL BANK Dated 6-4 4 , 1983 CREDIT NUMBER 1328 UG PROJEC AGREEME AGREEMENT, dated )7/ - , 1983, between INTERNATIONAL DEVELOPMENT SSOCIATION (hereinafter called the Association) and UGANDA COMMERCIAL BANK (hereinafter called UCB). WHEREAS by the Development Credit Agreement of even date herewith between Republic of Uganda (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equiva- lent to sixty three million five hundred thousand Special Drawing Rights (SDR 63,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that UCB agree to undertake such obligations toward the Association as are hereinafter set forth; and WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and UCB, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to UCB on the terms and conditions therein set forth; and WHEREAS UCB, 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. ARTICLE II Execution of the Project Section 2.01. (a) UCB shall carry out Part A of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and investment standards -2- and practices, with qualified and experienced management and in accordance with the UCB Act and the provisions of the Banking Act (Act Z of 1969) relating to loans-to-deposits ratio. (b) For the purposes of carrying out Part A.1 of the Pro- ject, UCB shall: (i) apply the appraisal and selection criteria and the allocation procedures set forth in the Schedule to this Agreement; (ii) make Sub-loans to Investment Enterprises at an interest rate of at least fourteen per cent (14%), with an amortization period of a maximum of not more than ten years. The interest rate on Sub- loans shall be adjusted from time to time in accordance with the provisions of Section 4.04 of the Development Credit Agreement; and (iii) assign three debt recovery officers, two senior credit analysts and two agricultural economists each with at least three years relevant experi- ence, to work full-time on the implementation of the said Part. Section 2.02. (a) In order to assist UCB in the preparation of detailed cost estimates and contracts for Part A of the Pro- ject, UCB shall employ an engineering surveyors' consultant. (b) In order to assist UCB in the supervision of the Investment Projects under Part A of the Project, UCB shall employ a consulting engineer. (c) In order to assist UCB in the implementation of Part A of the Project, UCB shall employ a development financing expert who shall be the Project Manager. (d) In order to assist UCB in the preparation of bidding documents and to provide assistance in the procurement of goods under Part B of the Project, UCB shall employ a procurement expert. (e) The qualifications, experience and terms and conditions of employment of the consultants and experts referred to in the preceding sub-paragraphs of this Section shall be satisfactory to -3- the Association, and such consultants and experts shall be selected in accordance with principles and procedures satisfac- tory to the Association on the basis of 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. (a) In accordance with and subject to the pro- visions of this Agreement, UCB shall submit Sub-loans for Invest- ment Enterprises to the Association for approval or for authori- zation of withdrawals to be made from the Credit Account. (b) When submitting a Sub-loan in an amount exceeding the equivalent of $1,500,000 to the Association for approval, UCB shall furnish an application, in a form satisfactory to the Asso- ciation, which shall include a description of the Investment Enterprise and of the Investment Project (including a description of the expenditures proposed to be financed, and an appraisal of the Investment Project) and such other information as the Asso- ciation shall reasonably request. (c) Each request by UCB for authorization to make with- drawals from the Credit Account in respect of a Sub-loan in an amount not exceeding the equivalent of $1,500,000 shall be accom- panied by a statement which shall contain a summary description of the Investment Enterprise and the Investment Project (includ- ing a description of expenditures proposed to be financed under the Sub-loan for such Investment Project), and the terms and con- ditions of such Sub-loan, including the Schedule of amortization therefor. (d) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace, and unless the Association and UCB shall otherwise agree: (i) shall not extend beyond ten years from the date of approval by the Association of such Sub-loan or, in the case of a Sub-loan not exceeding $1,500,000, of authorization by the Association to make with- drawals from the Credit Account in respect thereof; and (ii) shall provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal. (e) Except as the Association and UCB shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Association on or before December 31, 1988. -4- Section 2.04. (a) UCB undertakes that, unless the Associa- tion shall otherwise agree, any Sub-loan will be made on terms whereby UCB shall obtain, by written agreement or other appro- priate legal means, rights adequate to protect the interests of the Association and of UCB, including, in the case of any such Sub-loan: (i) the right to require the Investment Enterprise 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 be used exclusively in the carrying out of the Investment Project; (iii) the right of the Association and of UCB to inspect such goods and the sites, works, plants and construction included in the Investment Pro- ject, the operation thereof, and any relevant records and docu- ments; (iv) the right to require that the Investment 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 foregoing, such insur- ance shall cover hazards incident to the acquisition, transporta- tion and delivery of the goods financed out of the proceeds of the Sub-loan to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) the right to obtain all such information as the Association or UCB shall reasonably request relating to the foregoing, to the administration, operations and financial condition of the Invest- ment Enterprise and the benefits to be derived from the Invest- ment Projects; (vi) the right of UCB 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 agreement with UCB; (vii) the right of UCB to require that the rehabilitation needs of the Investment Enterprise shall be determined by UCB's engineering surveyors; and (viii) the right of UCB to require that the Investment Enterprise shall be rehabilitated by construction engineers retained and supervised by UCB. (b) UCB shall exercise its rights in relation to each In- vestment Project in such manner as to: (i) protect the interests of the Association and of UCB; (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement; and (iii) achieve the purposes of Part A of the Project. -5- (c) Except as the Association shall otherwise agree, pro- curement of the goods and civil works required for Part A.1 of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Develop- ment Credit Agreement. Section 2.05. UCB shall, by not later than December 31, 1983, prepare and implement a loan follow-up system for Sub-loan supervision, satisfactory to the Association. Section 2.06. UCB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, UCB shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving any provision of the Subsidiary Loan Agreement. Section 2.07. Except as the Association and UCB shall other- wise agree, UCB: (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, pri- vileges and franchises necessary or useful in the conduct of its business. Section 2.08. (a) UCB shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part A of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) UCB shall: (i) maintain records and procedures adequate to record and monitor the progress of Part A 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 Credit, and to disclose their use in Part A of the Project; and (ii) furnish to the Association annually beginning March 31, 1984, and on every March 31 all such information as the Associa- tion shall reasonably request concerning Part A of 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. -6- (c) Upon the award by UCB of any contract for goods, works or services to be financed out of the proceeds of the Credit allocated to Part A of the Project, the Association 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'Part A 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 UCB and the Association, UCB 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 of the Project, its cost and the benefits derived and to be derived from it, the per- formance by UCB and the Association of their respective obliga- tions under the Project Agreement and the accomplishment of the purposes of the Credit. (e) UCB shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, pro- perty and equipment of UCB and any relevant records and docu- ments. Section 2.09. (a) UCB shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of Part A of the Project, the performance of its obliga- tions under this Agreement and under the Subsidiary Loan Agree- ment, and other matters relating to the purposes of the Credit. (b) UCB shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Credit, or the performance by UCB of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Financial Covenants Section 3.01. (a) UCB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition.. -7- Section 3.02. UCB shall: (a) 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; (b) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year, (i) certified copies of its financial statements for such year as so audited, and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (c) furnish to the Association such other information con- cerning said accounts, financial statements, records and expendi- tures, as well as the audit thereof, as the Association shall from time to time reasonably request. Section 3.03. Except as the Association shall otherwise agree, UCB shall not incur any debt, if after the incurrence of such debt the aggregate amount of debt of UCB then incurred and outstanding would be greater than twenty times the equity of UCB. For the purposes of this Section: (a) The term "debt" means any indebtedness or liability of UCB arising from its operations as a commercial bank in any fiscal year. (b) Debt shall be deemed to be incurred: (i) 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 of such contract, agreement or instrument; (ii) under a guarantee acceptance or indemnity agreement, on the date the agreement pro- viding for such guarantee acceptance or indemnity has been enter- ed into but only to the extent that the guaranteed accepted or indemnified debt shall be outstanding; (iii) when UCB accepts any form of deposits; and (iv) on dividends declared but not yet paid. (c) The term "equity of UCB" means the sum of total unim- paired paid-up capital, retained earnings and reserves of UCB not allocated to cover specific liabilities. -8- (d) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, a debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 3.04. (a) Except as the Association shall otherwise agree, UCB shall: (i) by not later than December 31, 1983, undertake a revaluation of its fixed assets starting from its 1982 fiscal year in accordance with sound and consistently maintained methods of valuation and revaluation acceptable to the Association; and (ii) from its 1983 fiscal year, incorporate the results of its fixed asset revaluations in its financial statements. (b) In order to assist UCB in the valuation of its fixed assets as required by paragraph (a) of this Section, UCB shall employ an accounting firm, whose qualifications and experience shall be satisfactory to the Association. For the purposes of this Section, the term "fixed assets" means all movable and immovable assets held by UCB and used in its operations. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of UCB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or -9- (ii) a date 15 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify UCB of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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 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 UCB: Chairman/Managing Director Uganda Commercial Bank Head Office P.O. Box 973 Kampala, Uganda - 10 - Cable address: Talex: UGACO BANK 61149 (UC BANK) 61073 (UGACO BANK) Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of UCB may be taken or executed by its Manag- ing Director or such other person or persons as the Managing Director shall designate in writing, and UCB shall furnish to the Association sufficient evidence of the authority and the authen- ticated specimen signature of each such person. Section 5.03. 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 DEVELOPMENT ASSOCIATION By Regional Vice President Eastern Africa UGANDA COMMERCIAL BANK By Authorized Representative - 11 - SCHEDULE Appraisal and Selection Criteria and Allocation Procedures of UCB with respect to Part A of the Project A. Appraisal and Selection Criteria 1. Each project proposed to be financed by a Sub-loan shall be appraised by the engineering surveyors' consultants referred to in Section 2.02 (a) of the Project Agreement. 2. Each Investment Project shall meet the following economic and financial requirements: (a) Each Investment Project shall meet normal criteria of technical, economic and financial feasibility, credit worthiness, and managerial competence of the Investment Enterprises. (b) Each Investment Project shall provide satisfactory financial rates of return. 3. In appraising Investment Projects, particular regard shall be paid by UCB to the availability of adequate labor, cotton, coffee or other raw materials, as the case may be, in a particu- lar area served by a factory and their competitiveness relative to other crops grown in the same area. 4. The appraisal and selection criteria applied shall be con- sistently and systematically documented in the form of an apprai- sal report. B. Allocation of Sub-loans In allocating the proceeds of the Credit allocated to Part A of the Project, UCB shall take due account of the needs of the facilities eligible for rehabilitation under the said Part A which are owned by companies or partnerships incorporated or registered under the laws of the Borrower. 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 . FOR SECRETARY