India - Gorakhpur Expansion Project : Credit 0279 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 279 IN Project Agreement (Gorakhpur Expansion Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED JANUARY 7, 1972 CONFORMED COPY CREDIT NUMBER 279 IN Project Agreement (Gorakhpur Expansion Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND FERTILIZER CORPORATION OF INDIA DATED JANUARY 7, 1972 PROJECT AGREEMENT AGREEMENT, dated January 7, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and FERTILIZER CORPORATION OF INDIA (hereinafter called FCI). WHEREAS by a development credit agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million dollars ($10,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that FCI agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and FCI, the proceeds of the credit provided for under the Development Credit Agreement will be made available to FCI on the terms and conditions therein set forth; and WHEREAS FCI, 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, and the following additional terms have the following meanings: (a) "Toyo" means Toyo Engineering Corporation, Kasumigascki Building 2-5, 3-Chome, Kasumigascki, Chiyoda-Ku, Tokyo, Japan; (b) "Benfield" means Benfield Corporation, 666 Washington Road, Pittsburgh, Pennsylvania 15228, U.S.A.; 4 (c) "SIRM" means Shell International Research Maatachappy N.V., The Hague, Netherlands. ARTICLE II Execution of the Project Section 2.01. FCI shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and engineering prac(ices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. FCI will use its best efforts t.- carry out the Project by August 1, 1974, in accordance with the Critical Path Schedule and, in that regard, will give special attention to critical equipment procurement times. Section 2.02. In order to assist FCI in process and engineering design, equipment selection, construction and start-up, FCI shall obtain process licenses, plant design and consultant services acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. Except as the Association shall otherwise agree, FCI shall: (a) in carrying out the Project, act as managing contractor. In addition, FCI shall employ such competent and experienced contractors as are necessary to carry out the Project, after having obtained competitive bids whenever possible. 1 employ, for the duration of the Project, a suitably qualified and exper, -d Project Manager to be responsible for budget and schedule control and f. .-;al engineering, procurement, and construction duties, and provide the Project Manager with adequate staff and facilities to carry out such functions; (c) give due notice to the Association before making any changes in the position of the Project Manager in the Gorakhpur Plant; (d) appoint a suitably qualified successor to assure an orderly transition if it appears that a vacancy will occur in the position of the General Manager prior to start of commercial production; and (e) promptly enter into satisfactory arrangements with Indian Oil Corporation for supply of naphtha and the Uttar Pradesh State Electricity Board for supply of electricity so as to ensure such supplies in quantities sufficient for the full utilization of the facilities to be constructed under the Project. 5 Section 2.04. (a) FCI undertakes to insure, or make adequate provision for the insurance of, the equipment and materials to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards ificident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by FCI to replace or repair such goods. (b) Except as the Association shall otherwise agree, FCI shall cause all equipment, materials and services financed out of the proceeds of the Credit relent to it by the Borr-.:wer to be used exclusively for the Project. Section 2.05. (a) FCI shall furnish to the Association, promptly upon their preparation, the plans, reports, specifications, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) FCI shall: (i) maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the equipment and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) enable the Association's representatives to inspect the Project, the equipment financed out of such proceeds and any relevant records and documents; and (iii) furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the equipment, materials and services financed out of such proceeds. Section 2.06. FCI shall duly perform all its obligations under the Subsidiary Loan Agreement and the Supplementary Loan Agreements, if any. Except as the Association shall otherwise agree, FCI 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 2.07. FCI shall, under agreements with Toyo, Benfield and SIRM, obtain process licenses, plant designs and consultant services, acceptable to the Association upon terms and conditions satisfactory to the Association. ARTICLE III Management and Operations of FCI Section 3.01. (a) FCI shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial and engineering practices and under the supervision of experienced and competent management assisted by adequate competent staff. 6 (b) FCI shall fill any open positions in connection with the Project promptly as they become vacant by experienced, competent personnel. (c) FCI shall take all necessary steps, including in particular limiting its indebtedness (excluding debt incurred in the ordinary course of business and payable on demand or not more than one year after the date of such determination), to maintain a long-term debt-equity ratio not greater than 50:50 and to maintain an adequate liquidity position consistent with the provisions of Section 4.03 of this Agreement. For the purpose of this Section: (a) The term "long-term debt" means all debt maturing after one year from the date of such determination; and (b) The term "equity" means all unimpaired paid-in share capital plus accumulated earnings or losses from prior fiscal years not set apart for specific purposes. Section 3.02. Except as the Association shall otherwise agree, FCI shall: (a) at all times take all steps which are necessary to maintain its existence and its right to carry on operations and to acquire and retain ownership of all lands and to maintain and renew all interests in land a4dL.ther..properties and all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of its business; (b) at all times operate and maintain its plants, machinery, equipment and other property, and promptly make all necessary repairs and renewals thereof, in accordance with sound engineering practices; (c) not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking; and (d) not alter its corporate structure or amend its Memorandum of Association in any way that will materially and adversely affect its ability to perform its obligations under this Agreement. Section 3.03. FCI shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with sound practice. 7 ARTICLE IV Financial Covenants Section 4.01. FCI shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices, its operations and financial condition. Section 4.02. FCI shall (i) have an annual audit satisfactory to the Association, prepared by independent and competent auditors in accordance with sound auditing principles consistently applied, (ii) furnish to the Association certified copies of said audit in such scope and detail as the Association shall have reasonably requested as soon as available but in any case, except as the Association shall otherwise agree, not later than four months after the end of each fiscal year, (iii) furnish to the Association as soon as available, but in any case not later than 30 days after the end of each of the four quarters unaudited financial statements (balance sheets, statement of income and expenses and related statements) as of the end of the quarter, and (iv) furnish to the Association such other information concerning the accounts and financial statements of FCI and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, FCI (i) shall maintain a ratio of current assets to current liabilities of at ie, 2: 1; (ii) shall not declare dividends or prepay any debt if, after the payment of such dividend (assuming such payment was made on the date of such declaration) or debt, the ratio of FCI's current assets to current liabilities shall be less than 1.5:1; and (iii) shall not cause nor permit its Gorakhpur Unit to prepay any of its outstanding debts or to transfer amounts from its accounts to the rest of FCI's accounts, if such prepayment or transfer would reduce the Gorakhpur Unit's ratio of current assets to current liabilities below 1.1:1. For the purpose of this Section: (a) The term "current assets" means stock of spares, cash (excluding advances to contractors for construction of projects and for additions to fixed assets), assets readily convertible into cash, and all other assets which could in the ordinary course of business be converted within one year into cash or assets readily convertible into cash. (b) The term "current liabilities" means liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment, within one year including the portion of long-term indebtedness falling due within one year. 8 (c) The term "debt" does not include debt payable on demand or maturing not more than one year after its date. Section 4.04. FCl shall (a) maintain separate accounts for the Gorakhpur Unit and consolidated accounts for all its operations; (b) prepare annually consolidated source and application of funds statements for FCl and prepare quarterly and annually source and application of funds statements for the Gorakhpur Unit; (c) furnish to the Association quarterly, forecast budgets of operations and cash flow for FCI and for the Gorakhpur Unit; and (d) consult with the Association for reviewing and, where necessary, improving its accounting system and management information system and shall implement mutually agreed improvements as promptly as sound financial management practices permit. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and FCI shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and FCI shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of FCI and other matters relating to the purposes of the Credit. Section 5.02. The Association and FCI shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and FCI of their respective obligations under the Subsidiary Loan Agreement and the Supplementary Loan Agreements, if any. Section 5.03. FCI shall enable the Association's representatives to inspect all plans, sites, works, properties and equipment of FCI and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. 9 Section 6.02. (a) This Agreement and all obligations of the Association and of FCI 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) a date 16 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 FCI of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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: Indevas Washington, D.C. 10 For FCI: Fertilizer Corporation of India F-43, South Extension Area Part I Ring Road New Delhi - 49 Cablc address: Fertilizer New Delhi Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of FCI may be taken or executed by its Managing Director or such other person or persons as FCI shall designate in writing. Section 7.03. FCI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of FCI, take any action or execute any documents required or permitted to be taken or executed by FCI pursuant to any of the provisions of this Agreement. Section 7.04. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. Burke Knapp Vice President FERTILIZER CORPORATION OF INDIA By /s/ L. K. Jha Authorized Representative