CONFORMED COPY LOAN NUMBER 1437 IND Project Agreement (Third BAPINDO Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANK PEMBANGUNAN INDONESIA Dated June 6, 1977 PROJECT AGREEMENT AGREEMENT, dated June 6, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANK PEMBANGUNAN INDONESIA (hereinafter called BAPINDO), a State Development Bank established and operating under the laws of Republic of Indonesia. WHEREAS by the Loan Agreement of even date herewith between Republic of Indonesia (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to forty million dollars ($40,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that BAPINDO agrees to undertake such obligations toward the Bank as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and BAPINDO, the proceeds of the loan provided for under the Loan Agreement will be made available to BAPINDO on the terms and conditions therein set forth; and WHEREAS BAPINDO, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE 1 Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. - 3 - ARTICLE II Execution of the Project Section 2.01. BAPINDO shall carry out the Project described in Section 3.01 of the Loan Agreement and conduct its operations and affairs in accordance with sound financial standards and practices, with qualified management and personnel, and in accordance with the BAPINDO Act and Policy Statement. Section 2.02. BAPINDO shall cause the proceeds of the Loan to be applied exclusively to expenditures on Investment Projects in respect of which amounts have been withdrawn from the Loan Account in accordance with the provisions of the Project Agreement, the Loan Agreement and the Subsidiary Loan Agreement. Section 2.03. (a) In accordance with, and subject to, the provisions of the Loan Agreement, BAPINDO shall submit Investment Projects to tho Bank for approval or "or authorization to make withdrawals from the Loan Account. (b) When submitting a sub-loan (other than a free-limit sub-loan) or an investment to the Bank for approval BAPINDO shall furnish to the Bank an application, in form satisfactory to the Bank, together with (i) 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 Loan relent to BAPINDO under the Subsidiary Loan -4- Agreement, (ii) the proposed terms and conditions of the sub-loan or investment, including the schedule of amortization of the sub-loan or of repayment by BAPINDO of the amount of the proceeds of the Loan relent to BAPINDO under the Subsidiary Loan Agreement to be used for the investment, and (iii) such other information as the Bank shall reasonably request. (c) Each request by BAPINDO for authorization to make withdrawals from the Loan Account in respect of a free-limit sub-loan shall contain (i) 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 Loan relent to BAPINDO under the Subsidiary Loan Agreement, and (ii) 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 and the schedule of repayment to the Bank in respect of each investment shall provide for an appropriate period of grace, and, unless the Bank and the Borrower shall otherwise agree (i) shall not extend beyond fifteen years from the date of approval by the Bank of such sub-loan or investment, or in the case of a free-limit sub-loan, of authorization by the Bank to make withdrawals from the Loan Account in respect thereof, and (ii) shall provide for approximately equal semi-annual, or more - 5 - frequent, aggregate payments of principal and interest or approximately equal semi-annual, or more frequent, payments of principal. (e) BAPINDO shall transmit to the Bank, for its prior approval, any substantial changes proposed to be made by BAPINDO in respect of the repayment provisions of any sub-loan. (f) Except as the Bank and BAPINDO shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (b) and (c) of this Section shall be submitted to the Bank on or before September 30, 1979. Section 2.04. Except as the Bank may otherwise agree, BAPINDO shall not make any sub-loan in an amount exceeding the equivalent of $3,000,000 or in an amount which would exceed such limit when added to the amount of all other sub-loans made for the same Investment Project out of the proceeds of the Loan, Credit 310 IND or of Loan 1054 IND. Section 2.05. BAPINDO shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, BAPINDO 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. -6- Section 2.06. (a) BAPINDO shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) BAPINDO shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by BAPINDO of its obligations under this Agreement and under the Subsidiary Loan Agreement. - 7 - ARTICLE III Man.2gement and Operations of BAPINDO Section 3.01. (a) BAPINDO undertakes that, unless the Bank shall otherwise agree% any sub-loan or investment will be made on terms whereby BAPINDO shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank and BAPINDO, including, in the case of any sub-loan and to the extent that it shall be appropriate in the case of any investment, the right of BAPINDO to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due riligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require thnt (1) the goods and. services to be financed out of the proceeds of the Loan 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 availability 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 Bank if the Bank shall so request, such goods and the - 8 - sites, works, plants and construction included in the Investment 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 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 Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as the Bank or BAPINDO shall reasonably request relating to the foregoing 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 sub-loan upon failure by such Investment Enterprise to perform its obligations under its contract with the Borrower. (b) BAPINDO shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of, the Borrower, the Bank and BAPINDO, (ii) comply with its obligations under this Agreement, and (iii) achieve the purposes of the Project. -9- Section 3.02. BAPINDO shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan relent to BAPINDO under the Subsidiary Loan Agreement, the Project, the Investment Enterprises, the Investment Projects, and the sub-loans and investments. Section 3.03. BAPINDO shall duly perform all its obligations under agreements under which funds have been lent or otherwise put at the disposal of BAPINDO by the Borrower or its agencies or others for relending, investment or management. BAPINDO shall promptly inform the Bank of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. Section 3.04. If BAPINDO establishes or acquires any subsidiary, BAPINDO shall cause such subsidiary to observe and perform the obligations of BAPINDO hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such subsidiary. - 10 - Section 3.05. Except as the Bank and BAPINDO shall otherwise agree, BAPINDO: (i) shall not sell, lease, transfer or otherwise dispose of any of its property or assets, except in the ordinary course of business; and (ii) shall take all action necessary to maintain its corporate existence and right to carry on operations and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 3.06. BAPINDO shall not amend its Statement of Policy except in agreement with the Bank. Section 3.07. BAPINDO shall take all steps necessary to implement Part B of the Program of Action dated April 26, 1977 agreed upon among the Borrower, BAPINDO and the Bank. Section 3.08. In order co improve the position of BAPINDO's arrears and to control its rising administrative costs, BAPINDO shall prepare and furnish to the Bank a comprehensive plan acceptable to the Bank, and shall promptly take all steps necessary to implement such plan. Section 3.09. In order to strengthen its operations and research activities, BAPINDO shall (except as the Bank may otherwise agree) employ three experts, one each in development banking, economic research and market analysis, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. - 11 - ARTICLE IV Financial Covenants Section 4.01. BAPINDO shall maintain records adequate to record the progress of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of BAPINDO. Section 4.02. BAPINDO 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 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 four 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 the accounts and financial statements of BAP'NDO and the audit thereof as the Bank shall from time to time reasonably request. - 12 - Section 4.03. Except as the Bank shall otherwise agree, BAPINDO shall: (i) conduct its operations and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity ratio within the limit provided in Section 4.05 of this Agreement; and (ii) if such ratio shall, for reasons beyond the Borrower's control be temporarily exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 4.04. BAPINDO shall not make any repayment in advance of maturity in respect of any outstanding debt of BAPINDO which, in the judgment of the Bank, would materially affect BAPINDO's ability to meet its financial obligations. Section 4.05. Except as shall be otherwise agreed between the Bank and BAPINDO, BAPINDO shall not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of BAPINDO and all its subsidiaries then incurred and outstanding would be greater than three times the consolidated capital and surplus of BAPINDO and all its subsidiaries. For the purposes of this Section: (a) "debt" means any debt incurred by BAPINDO or any subsidiary maturing more than one year after the date on which it is originally incurred. - 13 - (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; and (iii) on deposits as and when they are received. (c) Whenever in connection with this Section it shall be necessary to value in terms of Rupiah debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exzhange at which such foreign currency is, at the time of such valuation, obtainable by the Borrower for the purposes of servicing such debt. (d) "consolidated debt of BAPINDO and all its subsidiaries" means the total amount of debt of BAPINDO and subsidiaries, excluding any debt owed by BAPINDO to any subsidiary or by any subsidiary to BAPINDO or to any other subsidiary. (e) "consolidated capital and surplus of BAPINDO and subsidiaries" means the aggregate of the unimpaired paid-up capital, surplus and free reserves of BAPINDO and of all its subsidiaries after excluding therefrom such amounts as shall represent equity interests of BAPINDO in any subsidiary or of any subsidiary in BAPINDO or any other subsidiary. - 14 - Section 4.06. BAPINDO shall take such steps satisfactory to the Bank as shall be necessary to protect itself against isk of loss resulting from changes in the rates of exchange between the currencies (including Rupiah) used in its operations. Section 4.07. The Bank and BAPINDO shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of BAPINDO and its subsidiaries, and BAPINDO shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration, operations and financial condition of BAPINDO and subsidiaries. Section 4.08. BAPINDO shall enable the Bank's representatives to inspect the records referred to in Section 4.01 of this Agreement and any relevant documents. - 15 - 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. (a) This Agreement and all obligations of the Bank and of BAPINDO thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. (b) If the Loan Agreement terminates in accordance with its terms before the date specified in paragraph (a) of this Section, the Bank shall promptly notify BAPINDO of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. - 16 - 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For BAPINDO: Bank Pembangunan Indonesia P.O. Box 140 Jakarta, Indonesia Cable address: Telex: BAPINDO BPINKB Jakarta 0144214 - 17 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of BAPINDO may be taken or executed by its President or such other person or persons as he shall designate in writing. Section 6.03. BAPINDO shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of BAPINDO, take any action or execute any documents required or permitted to be taken or executed by BAPINDO pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 18 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused .his 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/ S. Shahid Husain Regional Vice President East Asia and Pacific BANK PEMBANGUNAN INDONESIA By /s/ Roesmin Nurjadin Authorized Representative