Conformed Copy - C2875 - Economic Recovery and Investment Promotion Technical Assistance Project - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2875 ZA Project Agreement (Economic Recovery and Investment Promotion Technical Assistance Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and ZAMBIA CONSOLIDATED COPPER MINES LIMITED Dated July 31, 1996 CREDIT NUMBER 2875 ZA PROJECT AGREEMENT AGREEMENT, dated July 31, 1996, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and ZAMBIA CONSOLIDATED COPPER MINES LIMITED (ZCCM). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Zambia (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixteen million Special Drawing Rights (SDR 16,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ZCCM agree 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 ZCCM, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to ZCCM on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS ZCCM, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to under- take the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Page 2 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. ZCCM declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part A.2 of the Project with due diligence and efficiency and in conformity with appropriate administra- tive, financial, engineering, environmental and mining practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of consultants' services required for Part A.2 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 Development Credit Agreement. Section 2.03. (a) ZCCM 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 Project Agreement and Part A.2 of the Project. (b) For the purposes of Section 9.07 of the General Conditions and without limitation thereto, ZCCM shall: (i) prepare, on the basis of guidelines acceptable to the Association and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Association and ZCCM, a plan for the future operation of Part A.2 of the Project; and (ii) afford the Association a reasonable opportunity to exchange views with ZCCM on said plan. Section 2.04. ZCCM shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ZCCM 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) ZCCM shall, at the request of the Association, exchange views with the Association with regard to the progress of Part A.2 of the Project, the performance of its obligations under this Agree- ment and under the Subsidiary Loan Agreement and other matters relating to the purposes of the Credit. (b) ZCCM shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A.2 of the Project, the accomplishment of the purposes of the Credit, or the performance by ZCCM of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. ZCCM shall participate in the midterm review referred to in Section 3.04 of the Development Credit Agreement and shall there- after implement the relevant parts of the recommendations referred to in Section 3.04 (e) of the Development Credit Agreement relating to Part A.2 of the Project and implement Part A.2 of the Project taking into account the results of said review. ARTICLE III Management and Operations of ZCCM Page 3 Section 3.01. ZCCM shall carry out its operations and conduct its affairs in accordance with sound administrative, financial, environmental and mining practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. ZCCM 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 mining practices. Section 3.03. ZCCM shall take out and maintain with responsible insurers or make other provision satisfactory to the Association for insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04 ZCCM shall continue to maintain, until completion of the Project, the ZCCM Monitoring and Audit Committee with staff whose qualifications, experience and terms of reference shall be satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. (a) ZCCM shall maintain records and accounts adequate to reflect, in accordance with sound accounting practices, its operations and financial condition. (b) ZCCM 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 ZCCM 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 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify ZCCM of this event. Page 4 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For ZCCM: Zambia Consolidated Copper Mines Limited 5309 Dedon Kimathi Road P.O. Box 30048 Lusaka, Zambia Cable address: Telex: NCHANGA 44540 Lusaka, Zambia Telefax: 221057 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 ZCCM, or by ZCCM on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the Chairman or Chief Executive of ZCCM or such other person or persons as ZCCM shall designate in writing, and ZCCM shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counter- parts, 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 DEVELOPMENT ASSOCIATION Page 5 By /s/ Callisto Madavo Regional Vice President Africa ZAMBIA CONSOLIDATED COPPER MINES LIMITED By /s/ Dunstan Kamana Authorized Representative