Conformed Copy - C1874 - Priority Works Project - Project Agreement 2

Page 1 CONFORMED COPY CREDIT NUMBER 1874 GH (Priority Works Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANK FOR HOUSING AND CONSTRUCTION Dated February 18, 1988 PROJECT AGREEMENT AGREEMENT, dated February 18, 1988, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and BANK FOR HOUSING AND CONSTRUCTION (BHC). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Ghana (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to seven million eight hundred thousand Special Drawing Rights (SDR 7,800,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that BHC agrees to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and BHC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to BHC on the terms and conditions set forth in the Subsidiary Loan Agreement; and Page 2 WHEREAS BHC, in consideration of the Association's entering into the Development Credit 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 Development Credit Agreement, the Preamble to this 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) BHC declares its commitment to the objec- tives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Parts C (2) and D (2) of the Project with due diligence and efficiency and in conformity with appropriate economic, administrative, financial, banking and credit practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the said Parts of the Project. (b) BHC shall carry out the actions, and observe the lending terms and conditions, set out in the Schedule to this Agreement to the satisfaction of the Association, said Schedule being subject to modification by agreement between BHC and the Association. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Ghana Highway Authority (GHA) Project Agreement. Section 2.03. BHC shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 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 BHC Project Agreement and Parts C (2) and D (2) of the Project. Section 2.04. BHC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, BHC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) BHC shall, at the request of the Associa- tion, exchange views with the Association with regard to the pro- gress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement and other matters relating to the purposes of the Credit. (b) BHC shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of Parts C (2) and D (2) of the Project, the accomplishment of the purposes of the Credit, or the performance by BHC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of BHC Section 3.01. BHC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, banking and credit practices under the supervision of qualified Page 3 and experienced management assisted by competent staff in adequate numbers. ARTICLE IV Financial Covenants Section 4.01. (a) BHC shall, with respect to the Project, maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) BHC shall: (i) have its records, 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 six 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 said records, accounts and financial statements as well as the audit thereof, as the Association 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of BHC 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 (ii) the date 25 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 BHC of this event. 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 Page 4 permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated 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 BHC: Bank for Housing and Construction P.O. Box M 1 Accra, Ghana Cable address: Telex: BANKHOUSE 2096 Accra, Ghana 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 BHC, or by BHC on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by BHC's Managing Director or such other person or persons as BHC shall designate in writing, and BHC shall furnish to the Associa- tion 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 collec- tively 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 DEVELOPMENT ASSOCIATION By /s/ Edward V.K. Jaycox Regional Vice President Africa BANK FOR HOUSING AND CONSTRUCTION By /s/ Eric Otoo Authorized Representative SCHEDULE Page 5 Actions and lending terms and conditions Referred to in Section 2.01 (b) A. (1) BHC shall sell the housing units transferred to it by Technical Services Center (TSC) under Part C (1) of the Project on the open market at market value and on terms and conditions satisfactory to the Association. (2) BHC's responsibilities under Part C (2) of the Project shall include: (i) negotiating with TSC on the location and types of units to be sold; (ii) evaluating cost of sales and agreeing on a transfer price with TSC; (iii) liaising with TSC on completion of housing units; (iv) determining the fair market value of the housing units using qualified independent valuers; (v) establish- ing mortgage arrangements including deposit and payment schedules; (vi) taking deposits; (vii) granting and servicing mortgage loans; (viii) arranging for title transfers, (ix) opening and establish- ing project accounts; (x) undertaking project audits (including audits of mortgage accounts); (xi) preparing and submitting to TSC, quarterly, physical and financial reports on Part C of the Project; and (xii) making repayments to the Borrower out of the proceeds of mortgage loan repayments. B. (1) To qualify for developed plots under Part D of the Project, a developer must demonstrate a capacity to develop plans and build appropriate and affordable housing units for low income workers within two years of the project implementation period. The development plans shall be coordinated with TSC, Tema Development Corporation (TDC) and BHC and shall include buildings for sale, lease or rental to the workers. (2) Developers shall be required to allocate 70% of the developed housing units to workers below the 50th income percentile in their labor force. About 10% of the developed lots shall be let by BHC to qualified low-income families for self-help construction. (3) BHC shall provide mortgage loans to qualified developers to cover 60% of the cost of constructing units under Part D of the Project. The loans shall be in the form of one-year construction loans which at the end of the project construction period shall be rolled into a 20-year mortgage loan including 2 years of grace. The annual interest shall be at least two percentage points above the variable rate payable on loans made by the Bank. Developers shall bear any foreign exchange risks. (4) BHC's responsibilities under Part D (2) of the Project shall include: (i) liaising with TSC and TDC on the size, location, timing, cost, servicing and leasing of the developed lots; (ii) negotiating appropriate lease or sub-lease arrangements with TSC and TDC; (iii) negotiating (A) with SSNIT the provision by SSNIT of local costs financing for site consolidation, and (B) with TSC, the provision by TSC of foreign costs financing for site consolidation; (iv) soliciting the participation of Tema factory owners in Part D (2) of the Project; (v) making all arrangements relating to the grant leases or sub-leases by TDC to qualified applicants; (vi) negotiating and executing loan and mortgage agreements with qualified applicants; (vii) opening and establish- ing project accounts and undertaking project audits on terms and conditions satisfactory to the Association; (viii) servicing loans and mortgages; and (ix) providing TSC with quarterly physical and financial progress reports.