Jamaica - Kingston Sewerage And Water Supply Project : Loan 1146 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1146 JM Guarantee Agreement (Kingston Sewerage and Water Supply Project) BETWEEN JAMAICA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JULY 23, 1975 CONFORMED COPY LOAN NUMBER 1146 JM Guarantee Agreement (Kingston Sewerage and Water Supply Project) BETWEEN JAMAICA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JULY 23, 1975 GUARANTEE AGREEMENT AGREEMENT, dated July 23, 1975, between JAMAICA (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and The Water Commission, Kingston, Jamaica (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to fifteen million dollars ($15,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agrees to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. (a) Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual 4 payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. (b) Without limitation or restriction upon the provisions of paragraph (a) of this Section, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. Section 2.02. Except as the Bank shall otherwise agree, the Guarantor covenants that for operations up to March 31, 1976 the rates and other charges levied for sewerage services, together with funds provided by the Guarantor, if necessary, will be sufficient to cover the costs of operating the Borrower's sewerage services, including all operating costs, a reasonable portion of overhead costs, adequate maintenance, depreciation, interest and other charges on loans, and amortization of the loans to the extent that such amortization exceeds depreciation. Section 2.03. The Guarantor shall, during the financial year ending March 31, 1976 through the financial year ending March 31, 1979, promptly as needed, provide the Borrower with long-term loans on terms and conditions satisfactory to the Bank in an aggregate amount of not less than six million three hundred thousand Jamaican dollars (J$6,300,000) for purposes of carrying out the Project. Section 2.04. The Guarantor shall by the Effective Date make available to the Borrower such grant funds as may be necessary to cover operating deficits from the Borrower's sewerage services up to March 31, 1975. Section 2.05. The Guarantor shall by the Effective Date provide to the Bank, and promptly thereafter implement, a plan satisfactory to the Bank for capitalizing or writing off (i) overdue maturities of loans from the Guarantor to the Borrower outstanding as of March 31, 1975 and (ii) up to 50% of the balance of debt outstanding from the Borrower to the Guarantor as of said date. ARTICLE III Other Covenants Section 3.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign 5 exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Guarantor, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Guarantor shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Guarantor, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Guarantor or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Guarantor. Section 3.02. The Guarantor shall take such action as may be necessary to enable the Borrower to carry out the obligations referred to in Section 5.04(a) of the Loan Agreement. Section 3.03. The Guarantor undertakes that within 30 months of the date of this Agreement or such other period as may be agreed between the Guarantor and the Bank it will in consultation with the Bank complete its review of, and thereafter define, the organization and allocation of responsibilities of the public agencies within the water and sewerage sector. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Minister responsible for Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. 6 Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministry of Finance Kingston, Jamaica Cable address: MINISTRY OF FINANCE Kingston For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. 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. JAMAICA By /s/ Anthony Hill Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s / A. Krieger Regional Vice President Latin America and the Caribbean