CREDIT NUMBER 1076-LBR Project Agreement (Small and Medium Scale Enterprise Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL BANK OF LIBERIA Dated 4 kw< 1981 CREDIT NUMBER 1076-LBR PROJECT AGREEMENT AGREEMENT, dated 4t4", O , 1981, between the INTERNATIONAL DEVELUPMENT ASSOCIATION (hereinafter called the Association) and the NATIONAL BANK OF LIBERIA (hereinafter called NBL), a body corporate established under the National Bank of Liberia Act, 1974 as amended by an Act of the Republic of Liberia approved on November 7, 1977; WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Liberia (hereinafter called the Borrower) and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to three million two hundred thousand Special Draing Rights (SDR 3,200,000), on the terms and conditions set forth in the Develop- ment Credit Agreement, but only on condition that NBL agrees to undertake such obligations toward the Association as are herein- after set forth; WHEREAS three million three hundred and eighty thousand dollars ($3,380,000) equivalent or such other amount as shall be allocated to Categories (1) and (2) in the Schedule to the Devel- opment Credit Agreement will be relent out of the proceeds of the Credit by the Borrower to NBL for use by NBL in carrying out Part A of the Project; and WHEREAS NBL, 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 THEREFOEE 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. -2- ARTICLE II Execution of the Project; Management and Operations of NBL Section 2.01. (a) NBL shall through the participating banks carry out Part A of the Project described in Section 3.01 of the Development Credit Agreement and conduct its operations and affairs, with due diligence and efficiency and in conformity with appropriate economic, financial and investment standards and practices, with qualified and experienced management and in accordance with its Statutes. (b) NBL shall for the purpose of Part A of the Project prepare and send to the Association, a circular satisfactory to the Association which NBL shall issue to participating banks and which shall set out NBL's policy and procedures for the carrying out of that Part of the Project, the eligibility criteria, on- lending conditions and other terms and conditions (including those set out in the Schedule hereto) to be observed by the partici- pating banks. (c) NBL and the Association shall, no later than eighteen months after the date of this Agreement, review with the Borrower the definition of MSE set out in Section 1.02 of the Development Credit Agreement to decide whether or not the said definition need to be modified in the light of project experience. Section 2.02. (a) In accordance with and subject to the provisions of the Development Credit Agreement, NBL shall send Investment Projects received from participating banks to the Association for approval or for authorization for withdrawals to be made from the Credit Account. (b) (i) When sending a Sub-loan (other than a free-limit Sub-loan) to the Association for approv:al, NBL shall furnish to the Association an application, in form satisfactory to the Association, together with a description of the Investment Enter- prise and the Investment Project to be financed thereunder (including a description of the expenditures for such Investment Project proposed to be financed by the participating bank and an appraisal of the Investment Project furnished by the participating bank and approved by NBL) and the proposed terms and conditions of the Sub-loan including the schedule of amortization of the Sub- loan and such other information as the Association shall reason- ably request; and (ii) such appraisals will include the investment cost per job, a calculation of the internal financial rate of return and, in cases of MSE Investment Projects, an evaluation of the economic rate of return, established in accordance with guidelines satisfactory to the Association. Such economic rate of return shall be at least 10%, unless the Association shall otherwise agree. (c) Each request by NBL for authorization to make with- drawals 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 descrip- tion of the expenditures proposed to be financed by the partici- pating bank 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 Investment Project shall provide for an appropriate period of grace, and, unless the Association and the Borrower shall otherwise agree: (i) shall not extend beyond ten years from the date of approval by the Association of such Investment Project or of authorization by the Association to make withdrawals from the Credit Account in respect of such Investment Project; and (ii) shall provide for approxi- mately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal. (e) Except as the Association and NBL shall otherwise agree, NBL shall furnish applications for approval of Investment Projects pursuant to the provisions of paragragh (b) of this Section and requests for authorizations to withdraw from the Credit Account pursuant to the provisions of paragraph (c) of this Section on or before June 30, 1983. Section 2.03. (a) NBL undertakes that unless the Association shall otherwise agree, any Sub-loan will be made on terms whereby the participating bank shall obtain, by written agreement or other appropriate legal means, rights adequate to protect the interests of the Association, NBL and the participating bank, such as: (i) the right to require the Investment Enterprise to carry out and operate the Investment Project with due diligence and effi- ciency and in accordance with sound technical, financial and -4- managerial standards and to maintain adequate records; (ii) the right to require that the goods and services to be financed out of the proceeds of the Sub-loan be used exclusively in the carrying out of the Investment Project; (iii) the right of the Association, NBL and the participating bank to inspect such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) the right to require that the Invest- ment Enterprise take out and maintain such insurance, against such risks and in such amounts, as shall be consistent with sound business practice and that, without any limitation upon the foregoing, such insurance cover hazards incident to the acquisi- tion, transportation and delivery of the goods financed out of the proceeds of the Sub-loan to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) the right to obtain all such information as the Asso- ciation, NBL or the participating bank shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise and the benefits to be derived from the Investment Project and (vi) the right of the participating bank to 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 agreement with the participating bank. (b) NBL shall exercise its rights and shall ensure that the participating banks exercise their rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association, NBL and the participating banks; (ii) comply with NBL's obligations under this Agreement and the Subsidiary Loan Agreement; and (iii) achieve the purposes of Part A of the Project. Section 2.04. NBL shall furnish to the Association all such information as the Association shall reasonably request concerning Part A of the Project, the expenditure of the proceeds of the Sub-loans, including the Investment Enterprises, the Investment Projects and the Sub-loans. Section 2.05. NBL shall duly perform all its obligations under the Subsidiary Loan. Agreement. Except as the Association shall otherwise agree, NBL shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving any provision of the Subsidiary Loan Agreement. -5- Section 2.06. NBL shall not amend the circular referred to in Section 2.01 (b) above except in agreement wtth the Association, and shall exchange views with the Association on any proposal to modify its Statutes. ARTICLE III Financial Covenants Section 3.01. NBL shall maintain records adequate to record the progress of Part A of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition in respect of such Part of the Project and shall enable the Association's representatives to examine such records. Section 3.02. NBL shall: (i) maintain separate and identifi- able accounts and financial statements for Part A of the Project and shall have such accounts and financial statements for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able 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.the financial statements for such year as so audited and (B) the report of suzh 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 the said accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Association and NBL shall cooperate fully to assure that the purposes of the Credit will be accomp- lished. To that end, the Association and NBL shall from time to time, at the request of either party, exchange views through their representatives With regard to the progress of Part A of the Project, the performance by NBL of its obligations under this Agreement and the Subsidiary Loan Agreement, NBL's administration, operations and financial condition in respect of such Part of the Project and other matters relating to the purpose of the Credit. -6- (b) NBL shall furnish to the Association quarterly all such information as the Association shall reasonably request concerning the expenditures of the proceeds of the Credit, Part A of the Project, the Investment Enterprises, the Investment Projects, the Sub-loans and, where appropriate, the benefits to be derived from the foregoing. (c) Within six months following the last withdrawal from the Credit Account, NBL shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by NBL and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. Section 4.02. NBL shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by NBL of its obligations under this Agreement or the Subsidiary Loan Agreement. Section 4.03. NBL shall enable the Association's representa- tives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. 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 NBL thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date fourteen years after the date of this Agreement. -7- (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify NBL of this event, and upon the giving of such notice, this Agreement ard all obligations of the parties thereunder shall forthwith terminate. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under Article VI of 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 herein- after 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 address 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 NBL: National Bank of Liberia P.O. Box 2048 Monrovia Liberia -8- Cable address: NATBANK Liberia Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement or under Section 2.03 of the Development Credit Agreement on behalf of or by NBL may be taken or executed by its Governor, or by such other person or persons as such Governor shall designate in writing, and NBL shall furnish to the Asso- ciation sufficient evidence of the authority and the authen- ticated specimen signature of each such person. IN WITNESS WHEREOF, 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 94 1Regional Vice President Western Africa NATIONAL BANK OF LIBERIA By Authorized Representative -9- SCHEDULE I. Onlending Terms and Conditions for Sub-loans A. NBL to Participating Banks 1. Interest rate shall be at least 9% per annum plus 1% for Sub-loans eligible for guarantee under NBL's Credit Guarantee Scheme. Interest rates shall be subject to -eview from time to time by the Borrower. and the Association and shall, with respect to any Sub-loans not yet made, be adjusted in the light of market conditions and inflation. 2. NBL Shall not chArge any commitment fees. 3. Amortization schedules shall be determined on the aggregate repayment schedule of Sub-loans approved by the participating banks. 4. Any foreign exchange risk shall be borne by the Borrower. B. Participating Banks to Investment Enterprises 1. Interest rate shall be at least 13.5% per annum including the fee for guarantee under the Guarantee Scheme. Interest rates shall be subject to review from time to time by the Borrower and the Associa- tion and shall, with respect to any Sub-loans not yet made, be adjusted in the light of market conditions and inflation. 2. Participating banks may charge commitment fees on the undisbursed amount of Sub-loans. 3. NIC or participating banks may charge a one-time service charge of 1.5%. 4. Repayment of principal shall be in not more than 10 years or less than 30 months including a grace period of up to 24 months. 5* Investment Enterprises shall not bear any foreign exchange risk. - 10 - II. Sub-loan Approval Procedures 1. The promoter of an Investment Project shall present its Sub-loan request to the participating bank of its choice. Approval of the request shall rest with the participating bank, subject however to the grant of NBL's approval and the Association's refinancing approval. 2. NBL shall ensure that only Sub-loan proposals meeting eligibility criteria established under the Project are approved. 3. NBL shall furnish the Association with the informa- required by the Association to approve a Sub-loan proposal and shall be responsible for informing the participating banks of this approval. 4. NBL shall also screen disbursement requests to ensure that documentation is complete and accept- able to the Association. 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 thereunto the day of #aA , 198 L. FOR SECRETARY