CONFORMED COPY CREDIT NUMBER 646-JO PROJECT AGREEMENT (Industrial Development Bank Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and INDUSTRIAL DEVELOPMENT BANK OF JORDAN Dated July 19, 1976 PROJECT AGREEMENT AGREEMENT, dated July 19, 1976, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and INDUS- TRIAL DEVELOPMENT BANK OF 30ORDAN (hereinafter called IDB). WHEREAS by the Development Credit Agreement of even date here- with between The Hashemite Kingdom of Jordan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to four million dollars ($4,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that IDB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a Subsidiary Loan Agreement and an agreement re- ferred to in Section 3.03 of the Development Credit Agreement between the Borrower and 1DB, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to IDB on the terms and conditions therein set forth; and WHEREAS IDB, 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: 0I -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the con- text 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. -3- ARTICLE II Execution of the Project Management and Operations of IDB Section 2.01. IDB shall carry, out Parts A, B and C of the Proj- ect described in the Schedule to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and industrial practices, with qualified management and personnel, and in accordance with the Law and Stat!ment of Policy. Section 2.02. IDB shall cause such proceeds of the Credit relent or made available to it to be applied exclusively to expen- ditures for sub-loans, investments and sub-credits in respect of which amounts have been withdrawn from the Credit Account in accor- dance with the provisions of this Agreement, the Development Credit Agreement and the Subsidiary Loan Agreement. Section 2.03. (a) In accordance with, and subject to, the provisions of the Development Credit Agreement, IDB shall submit Investment Projects to the Association for approval or for autho- rization to make withdrawals from the Credit Account. (b) When submitting a sub-loan (other than a free-limit sub- loan) or an investment to the Association for approval, IDB shall furnish to the Association an application, in form satisfactory to the Association, together with a description of the Investment Enterprise and an appraisal of the Investment Project (including a description of the expenditures proposed to be financed out of the proceeds of the Credit relent to IDB under the Subsidiary Loan Agreement and the procurement methods for the goods and services to be financed out of the proceeds of the Credit) and the proposed terms and conditions of the sub-loan or investment, includina the schedule of amortization of the sub-loan and such other information as the Association shall reasonably request. (c) Each request by IDB for authorization to make withdrawals from the Credit Account in respect of a free-limit sub-loan shall contain a summary description of the Investment Enterprise and the Investment Project (including a description of the expenditures proposed to be financed out of the proceeds of the Credit relent to IDB under the Subsidiary Loan Agreement and the procurement methods for the goods and services to be financed out of the proceeds of the Credit) and the terms and conditions of such free-limit sub-loan, including the schedule of amortization therefor. (d) The amortization schedule applicable to each sub-loan snali provi.de for an appropriate period of grace. and, unless the Association and IDB shall otherwise agree (i) shall not extend beyond fifteen years from the date of approval by the Association of such sub-loan or investment, or in case of a free-limit sub-loan, of authorization by the Association to make withdrawals from the Credit Account in respect thereof, and (ii) shall provide for approximately equal semi-annual, or more frequent, aggregate pay- ments of principal, interest and charges or approximately equal semi-annual, or more frequent, payments of principal. (e) Except as the Association and IDB shall otherwise agree, applications and requests made pursuant to paragraphs (a) and (b) * - of this Section shall be submitted to the Association on or before June 30, 1979. Section 2.04. (a) IDB undertakes that, unless the Association shall otherwise agree, any sub-loan or investment will be made on terms whereby IDB shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association and IDB, in- cluding, in the case of any such sub-loan and to the extent that it shall be appropriate in the case of any such investment, the right of IDB to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with appropriate technical, financial and managerial standards and to maintain adequate records; (ii) re- * quire that (1) the goods and services to be financed out of the proceeds of the Credit shall be purchased 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 avail- ability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods and the sites, works, plants and construction included in the Invest- ment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (2) without any limitation upon 0 -6- the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to re- place or repair such goods; (v) obtain all such information as the Association or IDB shall reasonably request relating to the fore- going and to the administration, operations and financial condition of the Investment Enterprise; and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Credit upon failure by such Investment Enterprise to perform its obligations under its contract with IDB. (b) IDB shall exercise its rights in relation to each Invest- ment Project in such manner as to: (i) protect the interest of the Association and IDB, (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement, and (iii) achieve the purposes of the Project. Section 2.05. (a) In accordance with, and subject to, the provisions of the Development Credit Agreement and withdrawal procedures acceptable to the Association, IDB shall periodically submit evidence of its disbursements for development projects carried out by small-scale enterprises to the Association in order to make withdrawals from the Credit Account. (b) IDB shall quarterly submit to the Association progress reports on the entire Small Scale Industry and Handicraft Program of such scope and in such detail as the Association shall have re- quested. -7- (c) Except as the Association and IDB shall otherwise agree, requests made pursuant to the provisions of the withdrawal pro- cedures referred to in paragraph (a) of this Section shall be submitted to the Association on or before June 30, 1979. Section 2.06. IDB undertakes that, unless the Association shall otherwise agree: (i) any sub-credit will be made on terms whereby IDB shall obtain, by written contract with the small-scale enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association and IDB; and (ii) the principles contained in Section 2.04 of this Agreement shall, to the extent practicable, be applied to sub-credits. Section 2.07. IDB shall furnish to the Association: (i) all such information as the Association shall reasonably request con- cerning the expenditure of such proceeds of the Credit relent to IDB under the Subsidiary Loan Agreement or otherwise made available to IDB, Parts A and B of the Project, the Investment Enterprises, the Investment Projects, the sub-loans and investments, the small- scale enterprises and the sub-credits; and (ii) the Project Com- pletion Report. Section 2.08. IDB shall duly perform all its obligations under the Subsidiary Loan Agreement and any other agreements under which funds have been lent or otherwise put at the disposal of IDB by the Borrower or its agencies or others for relending, investment or management. IDB shall not take or concur in any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. -8- Section 2.09. If IDB establishes or acquires any subsidiary, IDB shall cause such subsidiary to observe and perform the obliga- tions of IDB hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such subsidiary. Section 2.10. IDB shall notify the Association concerning any proposed amendment to the Law, its Statement of Policy or the Small Scale Industry and Handicraft Program, and, before any such amendment is made, afford the Association a reasonable opportunity for consultation thereon. -9- ARTICLE III Financial Covenants Section 3.01. IDB shall maintain records adequate to record the progress of Parts A and B of the Project, of each Investment Project and the sub-credits (including the cost thereof) and to reflect in accordance with consistently maintained sound account- ing practices the operations and financial condition of IDB. Section 3.02. IDB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by indepen- dent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified cop- ies 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 con- cerning the accounts and financial statements of IDB and the audit thereof as the Association shall from time to time reasonably re- quest. Section 3.03. Except as the Association shall otherwise agree, IDB shall: (i) conduct its operations and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity - 10- ratio within the limit provided in Section 3.05 of this Agreement; and (ii) if such ratio shall, for reasons beyond IDB's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 3.04. IDB shall not make any repayment in advance of maturity in respect of any outstanding debt of IDB which, in the judgment of the Association, would materially affect IDB's ability to meet its financial obligations. Section 3.05. Except as shall be otherwise agreed between the Association and IDB, IDB shall not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the con- solidated debt of IDB and all its subsidiaries then incurred and outstanding would be greater than four times the consolidated cap- ital and surplus of IDB and all its subsidiaries. For the purposes of this Section: (a) "debt" means any debt incurred by IDB or any subsidiary maturing more than one year after the date on which it is originally incurred, and the term "incurring of debt" includes the assumption and guarantee of debt and any renewal, extension, or modif.ication of the terms of the debt or of the assumption or guarantee thereof. (b) Debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the Subsidiary Loan Agreement) on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such loan or agreement. and (ii) 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. * -11 - (c) Whenever in connection with this Section it shall be nec- essary to value, in terms of Jordanian Dinars, debt nayable in for- eitn currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by IDB for the purnoses of servicing such debt. (d) "consolidated debt of IDB and all its subsidiaries" means the total amount of debt of IDB and subsidiaries, excluding any debt owed by IDB to any subsidiary or by any subsidiary to IDB or to any other subsidiary. (e) "consolidated capital and surplus of IDB and subsidiaries" means the aggregate of the unimnaired paid-up capital, surplus and free reserves of IDB and subsidiaries after excluding therefrom such amounts as shall represent equity interests of IDB in any subsidiary or of any subsidiary in IDB or any other subsidiary. Section 3.06. IDB shall take such stens satisfactory to the Association as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including Jordanian Dinars) used in its lending and borrowing operations. Section 3.07. The Association and IDB shall from time to time, at the request of either party, exchange views through their repre- sentatives with regard to the administration, operations and finan- cial condition of IDB and its subsidiaries, and IDB shall furnish -12 - to the Association all such information as the Association shall reasonably reouest concerning the administration, operations and financial condition of IDB and subsidiaries, and the progress of the Project. Section 3.08. IDB shall enable the Association's representa- tives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. - 13 - 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 Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of IDB 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 twenty 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 promntly notify IDB of this event. Section 4.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or susDension under the Development Credit Agreement. 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 Association: Internationa 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 IDB: Industrial Development Bank P.O. Box 1982 Amman Hashemite Kingdom of Jordan Cable address: BANKSINAI Amman - 15 - Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of IDB may be taken or executed by the General Manager of IDB or such other person or persons as he shall designate in writing. Section 5.03. IDB 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 IDB, take any ac- tion or execute any documents required or permitted to be taken or executed by IDB pursuant to any of the provisions of this Agreement. Section 5.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 16 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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/ Maurice P. Bart Acting Regional Vice President Europe, Middle East and North Africa INDUSTRIAL DEVELOPMENT BANK OF JORDAN By /s/ Abdullah Salah Authorized Representative