Conformed Copy - L3443 - Regional Cement Industry Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3443 CHA (Regional Cement Industry Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NINGBO CEMENT COMPANY TONGLING CEMENT COMPANY ZHONGGUO CEMENT COMPANY Dated July 9, 1992 LOAN NUMBER 3443 CHA PROJECT AGREEMENT AGREEMENT, dated July 9, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NINGBO CEMENT COMPANY, TONGLING CEMENT COMPANY AND ZHONGGUO CEMENT COMPANY (the Companies). WHEREAS: (A) by the Loan Agreement of even date herewith between People's Republic of China (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-two million seven hundred thousand dollars ($82,700,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Companies agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by subsidiary loan agreements to be entered into between the Borrower and Ningbo Municipality, Anhui Province and Nanjing Municipality, and between Ningbo Municipality, Anhui Province and Nanjing Municipality and the Ningbo Company, the Tongling Company and the Zhongguo Company, respectively, a portion of the proceeds of the loan provided for under the Loan Agreement will be relent to the Companies on the terms and conditions set forth in said Subsidiary Loan Agreements; and WHEREAS each of the Companies, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in Page 2 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 and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Each of the Companies declares its commitment to the objectives of the Project as set forth in Schedule 1 to the Loan Agreement, and, to this end, the Ningbo Company shall carry out Part A.2, the Tongling Company shall carry out Part A.1, and the Zhongguo Company shall carry out Part B of the Project, all with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and cement industry practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for its respective Part of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Bank and each of the Companies shall otherwise agree, each of the Companies shall carry out its respective Part of the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for Parts A and B of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. Each of the Companies shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 Project Agreement and its respective Part of the Project. Section 2.04. Each of the Companies shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Bank shall otherwise agree, none of the Companies shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements to affect the provisions of paragraph (b) of Section 3.02 of the Loan Agreement. Section 2.05. (a) Each of the Companies shall, at the request of the Bank, exchange views with the Bank with regard to the progress of its respective Part of the project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreements, and other matters relating to the purposes of the Loan. (b) Each of the Companies shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of its respective Part of the Project, the accomplishment of the purposes of the Loan, or the performance by each of the Companies of its obligations under this Agreement and under the Subsidiary Loan Agreements. ARTICLE III Management and Operations of the Companies Section 3.01. Each of the Companies shall carry on its operations and conduct its affairs in accordance with its Charter and sound administrative, financial and cement industry practices under the supervision of qualified and experienced Page 3 management assisted by competent staff in adequate numbers. Section 3.02. Each of the Companies shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and cement industry practices. Section 3.03. Each of the Companies shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. The Ningbo Company and the Tongling Company shall inform the Bank promptly of any changes in the Ningbo Charter or the Tongling Charter, respectively, the joint venture agreements referred to in such Charters, or their respective management structures. ARTICLE IV Financial Covenants Section 4.01. (a) Each of the Companies shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) Each of the Companies 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 concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree: (i) none of the Companies shall incur any debt, unless a reasonable forecast of the revenues and expenditures of such Company shows that the estimated net revenues of such Company for each fiscal year during the term of the debt to be incurred shall be at least 1.2 times the estimated debt service requirements of such Company in such year on all debt of such Company including the debt to be incurred; (ii) none of the Companies shall incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 75 to 25; (iii) each Company shall maintain a ratio of current assets to current liabilities of not less than 1.2; (iv) before October 31 in each of its fiscal years, each Company shall, on the basis of forecasts satisfactory to the Bank, review whether it would meet the requirements set forth in sub-paragraph (iii) 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; and (v) if any such review shows that such Company would not meet the Page 4 requirements set forth in sub-paragraph (iii) for the fiscal years covered by such review, such Company shall promptly take all necessary measures in order to meet such requirements. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of such Company 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 operations adjusted to take account of such Company's prices in effect at the time of the incurrence of debt even though they were not in effect during the twelve-month period to which such revenues relate and net non-operating income; and (B) the sum of all expenses related to 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 (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 amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (vi) The term "equity" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of such Company not allocated to cover specific liabilities. (vii) The term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inventories and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (viii) The term "current liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes, and dividends. (ix) 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 Page 5 exchange acceptable to the Bank. Section 4.03. Each of the Companies shall prepare and review with the Bank, by October 31 of each year, starting October 31, 1992 and ending October 31, 1997, its five-year rolling financial plans, including production, marketing and investment plans, in the form of projected financial statements. 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 each of the Companies thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify each of the Companies 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. 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 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For the Ningbo Company: No. 62 Jiangdong Nan Lu Ningbo Municipality Zhejiang Province People's Republic of China For the Tongling Company: Yaodun Gusong Village Tongling Municipality Anhui Province People's Republic of China Page 6 Cable address: Telex: 4693 90516 TMPGA CN Tongling, Anhui For the Zhongguo Company: Longtan County Qixia District Nanjing Municipality Jiangsu Province People's Republic of China Cable address: Telex: 7901 34138 NBMIC CN Nanjing, Jiangsu 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 each of the Companies may be taken or executed by its General Manager or such other person or persons as its General Manager shall designate in writing, and each of the Companies shall furnish to the Bank 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 collectively 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Gautam S. Kaji Regional Vice President East Asia and Pacific NINGBO CEMENT COMPANY TONGLING CEMENT COMPANY ZHONGGUO CEMENT COMPANY By /s/ Zhu Qizhen Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods Part A: International Competitive Bidding Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Page 7 Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in China may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures Items or groups of items for estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount equivalent to $500,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $1,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to the Loan Agreement. 2. The provisions of paragraph 1(b) above shall not apply to contracts in respect of which the Bank shall have authorized withdrawals on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Companies in carrying out their respective Parts of the Project, each of the Companies shall employ consultants to provide technical services, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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. SCHEDULE 2 Implementation Program A. Part A of the Project 1. The Tongling Company shall enter into and thereafter implement the following contracts, satisfactory to the Bank, for the river transport facilities necessary to support Part A of the Project: (a) for the sale of clinker, between the Tongling Company and the Ningbo Company; Page 8 (b) for the sale of bulk cement, between the Tongling Company and the Nantong Building Materials Trading Company, and between the Tongling Company and the Wenzhou Building Materials Trading Company; (c) for the transport of clinker, among the Tongling Company, the Ningbo Company and the Shanghai Changjiang Shipping Company; and (d) for the transport of bulk cement, among the Tongling Company, the Anhui River and Sea Shipping Company, the Nantong Building Materials Trading Company and the Wenzhou Building Materials Trading Company. B. Parts A and B of the Project 1. Each of the Companies shall maintain the Project management team established for the purposes of carrying out such Company's respective Part of the Project, with staff and responsibilities acceptable to the Bank. 2. Each of the Companies shall carry out the training under Part (b) of its respective Part of the Project in accordance with a program agreed with the Bank. 3. Each of the Companies shall implement a management information system in accordance with scope and timing agreed with the Bank. 4. Each of the Companies shall construct and operate the facilities under its respective Part of the Project with due regard to safety, ecological and environmental factors and in accordance with environmental standards satisfactory to the Bank.