Conformed Copy - L3064 - Fifth Urban Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3064 TUN (Fifth Urban Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANQUE DE L'HABITAT Dated June 30, 1989 LOAN NUMBER 3064 TUN PROJECT AGREEMENT AGREEMENT, dated June 30, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and BANQUE DE L'HABITAT (BH). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Tunisia (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to fifty-eight million dollars ($58,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that BH agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and BH, a part of the proceeds of the Loan provided for under the Loan Agreement will be made available to BH on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS BH, in consideration of the Bank's entering into the Page 2 Loan 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 Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project; Management and Operations of BH Section 2.01. (a) BH declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out Parts A and B.2 of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and urban development practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation on the provisions of paragraph (a) of this Section, BH shall: (i) carry out Part B.2 of the Project in accordance with a program satisfactory to the Bank; and (ii) in order to assist BH in carrying out said Part B.2, employ consultants whose qualifications, experience and terms of reference shall be satisfactory to the Bank. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for Part B.2 of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.03. (a) BH undertakes that, unless the Bank shall otherwise agree, Sub-loans will be made for Sub-projects on the basis of the criteria and procedures and on the terms and conditions set forth in the Schedule to this Agreement. (b) BH shall exercise its rights in relation to each Sub- project in such manner as to: (i) protect the interests of the Borrower, of the Bank and of BH; (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 2.04. BH shall carry out the obligations set forth in Sections 9.05, 9.06 and 9.07, of the General Conditions (relating to use of goods and services, plans and schedules, records and reports respectively) in respect of the Project Agreement and Parts A and B.2 of the Project. Section 2.05. BH shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, BH 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 2.06. (a) BH shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts A and B.2 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 Loan. (b) BH shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts A Page 3 and B.2 of the Project, the accomplishment of the purposes of the Loan, or the performance by BH of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.07. For purposes of carrying out Part B.2 (a) of the Project, BH shall: (a) not later than December 31, 1989, furnish to the Bank an action plan satisfactory to the Bank setting forth the actions to be undertaken by BH to establish its internal organization; (b) not later than June 30 of each year, review with the Bank the progress achieved in carrying out such action plan; and (c) thereafter, based on such review, take all measures which may be deemed necessary to improve its performance during the following year. Section 2.08. BH shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, technical and banking practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. ARTICLE III Financial Covenants Section 3.01. (a) BH shall maintain procedures and records adequate to monitor and record the progress of Parts A and B.2 of the Project and of each Sub-project and to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. (b) BH 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 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 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 concern- ing said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 3.02. Except as the Bank may otherwise agree, BH shall open and thereafter maintain on its books in accordance with its normal accounting procedures and on conditions satisfactory to the Bank a separate account to which it shall credit each payment of interest or other charges on, or repayment of principal under, a Sub-loan upon receipt thereof. All amounts so credited to said separate account shall be utilized by BH, to the extent they are not yet required to meet BH's repayment obligations to the Borrower under the Subsidiary Loan Agreement, exclusively to finance the development of land, the construction, rehabilitation and extension of housing and the purchase of new housing units in accordance with guidelines satisfactory to the Bank. Section 3.03. (a) Except as the Bank shall otherwise agree, BH shall not incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 15 to 1. (b) For purposes of this Section: (i) The term "debt" means any indebtedness of BH Page 4 maturing by its terms more than one year 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 outstanding pursuant to such contract, agreement or instrument; (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 "equity" means the sum of the total unim- paired paid-up capital, retained earnings and reserves of BH not allocated to cover specific liabilities. (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, 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 Bank. Section 3.04. (a) Except as the Bank shall otherwise agree, BH shall not incur any debt unless a reasonable forecast, prepared by BH and satisfactory to the Bank, of the revenues and expenditures of BH shows that the estimated net revenues of BH for each fiscal year during the term of the debt to be incurred shall be at least 1.1 times the estimated debt service requirements of BH in such year on all debt of BH including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of BH maturing by its terms more than one year 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 of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all sources related to banking operations and net non-operating income; and (B) the sum of all expenses related to banking operations, including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (iv) The term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and Page 5 (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (v) The term "debt service requirements" means the aggregate of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, 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 Bank. Section 3.05. (a) Except as the Bank shall otherwise agree, BH shall take all necessary measures satisfactory to the Bank as shall be required to earn an annual return on its lending operations of not less than 2% starting with its Fiscal Year ending December 31, 1989. (b) Before June 30 in each Fiscal Year, BH shall, on the basis of forecasts prepared by BH and satisfactory to the Bank, review whether it would meet the requirement set forth in paragraph (a) in respect of such year and the next following Fiscal Year and shall furnish to the Bank the results of such review upon its completion. (c) If any such review shows that BH would not meet the requirement set forth in paragraph (a) for BH's Fiscal Years covered by such review, BH shall take all necessary measures (including, without limitation, adjustments of the structure or levels of its interest rates and other financial charges) in order to meet such requirement. (d) For purposes of this Section: (i) The annual return on BH's lending operations shall be calculated by subtracting BH's total financial expenses for the fiscal year in question from its total operating revenues for said fiscal year and dividing the result by the average gross value of BH's loan assets. (ii) The term "loan assets" means the total principal amount disbursed and outstanding of all loans made by BH. (iii) The term "total operating revenues" means revenues from all sources related to banking operations. (iv) The term "total financial expenses" means all interest and other charges on indebtedness of the Borrower, provisions for losses on loans made by the Borrower, and provision for foreign exchange losses. (v) The average gross value of BH's loan assets shall be calculated as one half of the sum of the gross value of such assets at the beginning and at the end of the fiscal year, as valued from time to time in accordance with sound and consistently maintained methods of valuation satisfactory to the Bank. Section 3.06. BH shall take such steps, satisfactory to the Bank, as shall be necessary to protect itself against risk of loss resulting from changes in the rate of exchange between the Page 6 currencies (including the currency of the Borrower) 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 Loan Agreement becomes effective. Section 4.02. This Agreement and all obligations of the Bank and of BH hereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify BH thereof. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation 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 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, D.C. 248423 (RCA) or 64145 (WUI) For BH: Banque de l'Habitat 4 rue Jean Jacques Rousseau 1001 Tunis Republic of Tunisia Cable address: Telex: 14349 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 BH may be taken or executed by its President Director General or such other person or persons as the President Director General shall designate in writing, and BH shall furnish to the Bank sufficient evidence of the authority and the authenticated 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 collectively but one instrument. Page 7 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Kemal Dervis Acting Regional Vice President Europe, Middle East and North Africa BANQUE DE L'HABITAT By /s/ Abdelaziz Hamzaoui Authorized Representative SCHEDULE Sub-loans: Criteria, Procedures and Principal Terms and Conditions Except as the Bank and BH shall otherwise agree, the criteria, procedures and terms and conditions set forth or referred to in this Schedule shall apply for the purposes of Section 2.03 (a) of this Agreement. I. Each Sub-loan under Part A of the Project shall be made only to a Beneficiary who shall have opened an account at BH and shall have established its creditworthiness to the satisfaction of BH in accordance with guidelines satisfactory to the Bank. II. (a) Each Sub-loan under Part A (1) and (2) of the Project shall be made only for a Sub-project which: (i) is designed such that the estimated selling price of each housing unit shall not exceed 30,000 Dinars, and the estimated selling price of each lot divided by the number of housing units to be constructed therein shall not exceed 7,000 Dinars; (ii) in the case where it includes housing construction in residential areas, is designed such that the density of housing shall be about 45 units per hectare, individual lots shall not exceed 200 m2 and the circulation area shall not exceed 40% of the total area; (iii) is located in urban areas with substantial demand established on the basis of a marketing study carried out by the developer and reviewed by BH, and in sites adequately serviced by physical and social infrastructure; and (iv) shall have an economic rate of return equal to at least 12%, and a financial rate of return equal to at least the interest rate applicable to the Sub- loan proposed to be made by BH for such Sub- project; all as shall be established to the satisfaction of BH on the basis of an appraisal carried out by BH in accordance with guidelines acceptable to the Bank. (b) Sub-loans to developers for Sub-projects under Part A (1) and (2) of the Project shall bear interest at an annual rate Page 8 equal to at least BH's total weighted average cost of funds, determined in accordance with a methodology satisfactory to the Bank, plus two percentage points. The term of such Sub-loans shall not exceed three years. The amount of each Sub-loan for construction under Part A (2) of the Project shall not exceed 70% of the total estimated construction cost of the housing unit or 90% of such construction cost if the selling price of the housing unit is estimated to be less than 12,000 Dinars (constant 1988 prices); and the amount of each Sub-loan for land development under Part A (1) of the Project shall not exceed 70% of the estimated cost of land development or 90% of such cost of land development if the selling price of housing units to be constructed on the land to be so developed is estimated to be less than 12,000 Dinars (constant 1988 prices); all as shall be established to the satisfaction of BH on the basis of guidelines satisfactory to the Bank. III. (a) Each Sub-loan under Part A (3), (4) and (5) of the Project shall be made only for a Sub-project whose estimated cost shall not exceed 30,000 Dinars. (b) The amount of each Sub-loan under Part A (3), (4) and (5) of the Project shall not exceed 70% of the estimated cost of the Sub-project or 90% of such cost if the construction cost of said Sub-project or, in the case of a Sub-project for housing acquisition under Part A (3) of the Project, the purchase price of the housing unit so acquired is estimated to be less than 12,000 Dinars (constant 1988 prices). The term of each Sub-loan to improve an existing dwelling under Part A (5) of the Project shall not exceed ten years. The term of each Sub-loan for acquisition of a new housing unit under Part A (3) of the Project and for housing construction under Part A (4) thereof shall not exceed twenty years, including a grace period of two years. Sub-loans under Part A (3), (4) and (5) of the Project shall bear interest at a rate per annum to be determined in respect of each Sub-loan, taking into account the Beneficiary's income and cost of the Sub- project, provided that the average annual interest rate applicable to all such Sub-loans shall be equal to at least BH's total weighted average cost of funds, determined in accordance with a methodology satisfactory to the Bank, plus two percentage points. Interest on the amounts of Sub-loans for housing construction shall be capitalized during the grace period specified above. IV. No expenditures required for a Sub-project and to be financed under a Sub-loan shall be eligible for financing out of the proceeds of the Loan unless such expenditures shall have been made not earlier than one hundred twenty days prior to the date on which the Bank shall have received the information required under Part V (b) or (c) of this Schedule in respect of such Sub-project or Sub-loan, as the case may be. V. (a) Each Sub-loan for a Sub-project whose cost is estimated to exceed 500,000 Dinars shall be made only after and to the extent the Sub-project shall have been approved by the Bank and the Bank shall have notified BH of its approval thereof. (b) When presenting a Sub-project to the Bank for approval, BH shall furnish to the Bank an application, in a form satisfactory to the Bank, together with: (i) a description of the Beneficiary and the appraisal of the Sub-project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the Sub-loan for the Sub-project, including the schedule of amortization of the Sub-loan; and (iii) such other information as the Bank shall reasonably request. (c) Each request by BH for authorization to make withdrawals from the Loan Account in respect of a Sub-loan shall contain: (i) a summary description of the Beneficiary and the Sub-project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the terms and conditions of the Sub-loan, including the schedule of amortization Page 9 therefor; and (iii) such other information as the Bank shall reasonably request. (d) Applications and requests made pursuant to the provisions of sub-paragraphs (a) and (b) of this paragraph shall be presented to the Bank on or before December 31, 1992. VI. Sub-loans shall be made on the terms and conditions set forth in Parts II and III of this Schedule and on the following additional principal terms and conditions: (a) BH shall obtain, by written contract with the Beneficiary or by other appropriate legal means, rights adequate to protect the interests of the Bank and of BH, including where applicable: (i) that each Beneficiary shall undertake to: (A) carry out and operate the Sub-project with due diligence and efficiency and in accordance with sound technical, financial, architectural, engineering and urban planning standards, to provide promptly as needed, the funds, facilities and other resources required for the purpose, and to maintain adequate records; (B) purchase the goods and services to be financed out of the proceeds of the Loan at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods, and in the case of services, of their quality and the competence of the parties rendering them; (C) use such goods and services exclusively in the carrying out of the Sub-project; (D) enable the Bank and BH to inspect the sites, works and construction included in the Sub- project, the operation thereof and any relevant documents; (E) take and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practices; (F) prepare and promptly furnish to BH for forwarding to the Bank if so requested by the Bank, all such information as the Bank or BH shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Beneficiary and to the benefits to be derived from the Sub-project; and (G) in respect of Sub- projects for housing acquisition under Part A (3) of the Project, an undertaking from the Beneficiary that the unit to be financed under the Sub-loan shall be used as the Beneficiary's principal residence; and (ii) provisions to ensure the right of BH to suspend or terminate the right of the Beneficiary to the use of the proceeds of the Loan upon failure by such Beneficiary to perform its obligations under its contract with BH.