CREDIT NUMBER 1506 SU O~i'F1CA DOCUMENTS, New Haifa Project Agreement (Sugar Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NEW HALFA SUGAR COMPANY LIMITED Dated , 1984 CREDIT NUMBER 1506 SU PROJECT AGREEMENT AGREEMENT, dated &a, 1984, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and NEW HALFA SUGAR COMPANY LIMITED (hereinafter called NHSC). WHEREAS (A) by the Development Credit Agreement of even date herewith between The Democratic Republic of Sudan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fifty-six million four hundred thousand Special Drawing Rights (SDR 56,400,000), on the terms and condi- tions set forth in the Development Credit Agreement, but only on condition that NHSC agree to undertake such obligations toward the Association as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and NHSC, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to NHSC on the terms and conditions therein set forth; and WHEREAS NHSC, 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. ARTICLE II Execution of the Project Section 2.01. NHSC 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 E of the - 2 - Project described in said Schedule with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices. Section 2.02. (a) In order to assist NHSC in carrying out Part E of the Project, NHSC shall employ, in accordance with the Annual Work Program, management and other consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, such consultants to be selected in accordance with principles and procedures satis- factory to the Association 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. (b) NHSC shall collaborate, under arrangements satisfactory to the Association, with SPIC in the recruitment of the consul- tants referred to in paragraph (a) above. Section 2.03. Except as the Association shall otherwise agree: (a) procurement of the goods and civil works required for Part E 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; and (b) NHSC shall collaborate, under arrangements satisfactory to the Association, with MOFEP's Project Procurement Committee and SPIC in the procurement of goods and civil works. Section 2.04. (a) NHSC undertakes to insure, or make ade- quate provision foc %he insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by the Borrower against hazards incident 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 NHSC to replace or repair such goods. (b) NHSC shall cause all goods and services financed out of the proceeds of the Credit made available to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) NHSC shall furnish through SPIC to the Association, promptly upon their preparation, the plans, specift- cRtions, reports, contract documents and work and procurement - 3 - schedules for Part E of the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Asso- ciation shall reasonably request. (b) NHSC shall: (i) maintain records and procedures ade- quate to record and monitor the progress of Part E of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish through SPIC to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by NHSC of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between NHSC and the Association, NHSC shall prepare and furnish to the Association through SPIC a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of its part of the Project, its cost and the benefits derived and to be derived from it, the performance by NHSC and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit. (e) NHSC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of NHSC and any relevant records and documents. Section 2.06. NHSC shall duly perform all its obligations under the respective Subsidiary Loan Agreement. Except as the Association shall otherwise agree, NHSC shall not take or coacur in any action which would have the effect of amending, abroga- ting, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) NHSC shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the respective Subsidiary Loan Agree- ment, and other matters relating to the purposes of the Credit. (b) NHSC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by NHSC of its obligations under this Agreement and under the respective Subsidiary Loan Agreement. Section 2.08. (a) NHSC shall prepare and submit to SPIC, not later than August 31, 1984, and thereafter not later than March 1 of each year, a draft annual work program for the following fiscal year with respect to Part E of the Project, such programs to be prepared according to a format and to include items satisfactory to the Association. (b) After receipt of the Association's notification that it has found the proposed Annual Work Program satisfactory, NHSC shall carry out in the following fiscal year its activities with respect to Part E of the Project in accordance with such program, ARTICLE III Management and Operations of NHSC Section 3.01. NHSC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and agricultural practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. NHSC 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 agriculttral practices. - 5 - Section 3.03. NHSC shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practices. Section 3.04. NHSC shall: (a) accept an annual review of its performance by consul- tants employed by the Borrower; and (b) exchange views with the Borrower and the Association not later than September 30 of each year on the remedial actions proposed by said consultants. ARTICLE IV Financial Covenants Section 4.01. (a) NHSC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure. (b) NHSC shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure, and shall enable the Association's representatives to examine such records. Section 4.02. NHSC shall: (a) furnish to the Association, not later than March 31, 1985, its initial balance sheet based on principles satisfactory to the Association; (b) have its accounts and financial statements (balance sheets, statements of income and expenses, and related state- ments) for each fiscal year audited, in accordance with appro- priate auditing principles consistently applied, by independent auditors acceptable to the Association; (c) furnish to the Association as soon as available, but not later than six months after the end of each such year, unaudited financial statements; - 6 - (d) furnish to the Association as soon as available, but not later than nine months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; and (ii) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including, without limitation upon the foregoing, separate opinions by said auditors in respect of expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Credit made avail- able to it and withdrawn from the Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (e) furnish to the Association such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.03. Except as the Borrower and the Association may otherwise agree: (a) NIISC shall not incur any debt if, after the incurrence of such debt, the debt of NHSC shall be greater than the equity of NHSC. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of NHSC 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 instra- ment; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "equity" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of NHSC not allocated to cover specific liabilities. - 7 - (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of Sudanese Pounds, debt payable in another currency, such valuation shall be made on the basis of the prevailing official rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt. Section 4.04. Except as the Borrower and the Association may otherwise agree: (a) NHSC shall not incur any debt, unless its net revenues for the fiscal year immediately preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be at least 1.5 times the estimated maximum debt service requirements of NHSC for any succeeding fiscal year on all debt of NIISC, including the debt to be incurred. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of NHSC 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 instru- ment; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been enteced into. (iii) The term "net revenues" means the difference between: (A) the sum of revenues from all soLIrces related to operations adjusted to take account of NHSC'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 -8 - (B) the sum of all expenses related to operations including administration, adequate mainte- nance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash 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) Whenever for the purposes of this Section it shall be necessary to value, in terms of Sudanese Pounds, debt payable in another currency, such valuation shall be made on the basis of the pre- vailing official rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt. 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 NHSC 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 - 9 - (ii) a date twelve years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in para- graph (a) (ii) of this Section, the Association shall promptly notify NHSC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For New Halfa Sugar Company Limited: c/o Ministry of Industry P.O. Box 2184 Khartoum The Democratic Republic of Sudan - 10 - Cable address: Telex: SADDEN 22665-SUKAR Khartoum, Sudan 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 NHSC, may be taken or executed by its Managing Director or such other person or persons as NHSC shall designate in writing, and NHSC 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 counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WREREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 By V Regional Vi.e P esident Eastern Africa NEW HALFA SUGAR COMPANY LIMITED By /uthorized R Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association ther to the day of 1987 d. FOR SECRETARY