Uganda - Uganda Tea Growers Corporation Project : Credit 0109 - Credit Agreement - Conformed

CREDIT NUMBER 109 UG Development Credit Agreement (Uganda Tea Growers Corporation Project) BETWEEN REPUBLIC OF UGANDA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMdBER 15, 1967 S CREDIT NUMBER 109 UG Development Credit Agreement (Uganda Tea Growers Corporation Project) BETWEEN REPUBLIC OF UGANDA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED SEPTEMBER 15, 1967 Drorlopmnt (Trbit Agrument AGREEMENT, dated September 15, 1967, between REPUBLIC or UGANDA (hereinafter called the Borrower) and INTER- NATIONAL DEVELOPMENT AssOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower and the Uganda Tea Growers Corporaion (hereinafter called UTGC), a statutory body established by The Uganda Tea Growers Corporation Act, 1966 of the Borrower, are executing a project for the development of tea production by smallholders; (B) The Commonwealth Development Corporation (here- inafter called CDC), a corporation established under the Overseas Resources Act, 1948 of the United Kingdom, intenls to enter into an agreement with the Government of the Borrower and UTGC providing, inter alia, for a loan of up to £301,000 sterling in the currency of the United Kingdom of Great Britain and Northern Ireland from CDC to UTGC for the fleld sector of this project; (C) CDC intends, provided certain conditions are ful- filled, to contribute towards the financing of the tea factories forming a part of this project ,nd in connection with the financing of such factories UTGC may borrow additional amounts from other lenders including Agricultural Enter- prises Limited and the Government of the Borrower; (D) The Government of the Borrower and UTGC have entered into an agreement dated March 8, 1967 providing, inter alia, for the supplying by the Government of the Borrower of the field staff required for the proper carrying out of this project and the necessary housing and transport facilities for such staff; (E) The Uganda Land Commission has entered into an agreement with UTGC dated February 1, 1967 in respect 0 4 of the sale to UTGC of 1,000 acres of land (including 200 acres of established tea) in the Munobwa area of Uganda adjacent to the existing Tea Research Station on terms which provide that UTGC is to have the exclusive use of such land from the date of such agreement and that UTGC is to pay the purchase price of such land amounting to 1,333,280 Uganda shillings, without interest being added, in 20 equal annual installments beginning in the eloventh year from the date of such agreement; (F) The Borrower has provided UTGC, on the same financial terms referred to in RECITAL (E), a credit amounting to 331,400 Uganda shillings for the purchase of buildings, equipment, furniture and tea stumps existing on the land referred to in RECITAL (E) and for compensating the tenants thereon; (G) The Borrower and UTGC have requested the Association to assist in the financing of this project for the development of tea production; and (H) The Association is willing to make a development credit available on the terms and conditions provided herein and in a project agreement of even date herewith between the Association and UTGC; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I Credit Regulations; Special Definitions SECTION 1.01. The parties to this Agreement accept all the provisions of Development Credit Regulations No. 1 of the Association dated June 1, 1961 as amended February 9, 1967 with the same force and effect as if they were fully set forth herein subject, however, to the following modifications thereof (said Development Credit Regulations No. 1 as so modified being hereinafter called the Regulations): 5 (a) Subparagraph (c) of Section 5.02 is amended by deleting the words ", or any bonds or other obligations issued thereunder" and substituting therefor the words "or the loan agreement between the Uganda Protectorate and the Bank dated March 29, 1961 or under the letter of guarantee executed by the Acting Governor of the Uganda Protectorate dated June 1, 1955 or under any bonds or other obligations issued under any such agreement." (b) Section 6.02 is amended by inserting the words "or the Project Agreement" after the words "the Development Credit Agreement." (c) The following subparagraph is added to Section 9.01: "13. The term 'Project Agreement' shall have the meaning set forth in the Development Credit Agree- ment.'' SECTION 1.02. Wherever used in this Agreement or in the Schedule thereto, unless the context shall otherwise require, the following terms shall have the following meanings: (a) The term "Project Agreement" means the agreement between the Association and UTGC of even date herewith, providing for the carrying out of the Project, as the same shall be amended from time to time by agreement between the Borrower, the Association and UTGC. (b) The term "Supervision Agreement" means the agreement between the Government of the Borrower and UTGC referred to in Recital (D) of this Agreement, as the same shall be amended from time to time with the approval of the Association. (c) The term "Subsidiary Loan Agreement" means the agreement referred to in Section 4.02(a) of this Agreement to be entered into between the Government of the Borrower and UTGC, as the same shall be amended from time to time with the approval of the Association. 6 ARTICLE II The Credit SECTION 2.01. The Association agrees to make available to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, a development credit in an amount in various currencies equivalent to three million four hundred thousand dollars ($3,400,000). SECTION 2.02. The Association shall open a Credit Account in the name of the Borrower and shall credit to such Credit Account the amount of the Credit. The amount of the Credit may be withdrawn from the Credit Account as provided in, and subjcct to the rights of cancellation and suspension set forth in, the Development Credit Agreement. SECTION 2.03. Except as the Borrower and the Associ- ation shall other\wise agree: (a) the Borrower shall be entitled, subject to the pro- visions of the Development Credit Agreement, to withdraw from the Credit Account in such freely convertible cur- rencies as the Association shall reasonably select: (i) amounts, up to the equivalent of $2,600,000, equivalent to 75%o of (x) such amounts as shall have been expeii(led on Part A of the field sector of the Project less (y) the revenues of UTGC dnring the period of such expenditures; provided, however, that no withdrawals shall be made pursuant to this paragraph (i) unless the Borrower shall certify in respect of each with- drawal that UTGC has applied to CDC for a withdrawal in connection with the loan referred to in Recital (B) of this Agreement in an amount equivalent to 331/3 %/ of the amount to be- withdrawn from the Credit Account pursuant 7 to this paragraph (i) and that no circumstances exist which would justify the denial by CDC of such application; and (ii) amounts, up to the equivalent of $800,000, equivalent to 80% of such amounts as shall have been expended on Part B of the field sector of the Project; and (b) no withdrawal shall be made on account of expendi- tures incurred prior to September 15, 1966. SECTION 2.04. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%/o) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. SECTION 2.05. Service charges shall be payable semi- anually on February 1 and August 1 in each year. SECTION 2.06. The Borrower shall repay the principal of the Credit withdrawn from the Credit Account in semi- annual installments payable on each February 1 and August 1 commencing August 1, 1977 and ending Febru- ary 1, 2017, each installment to and including the installment payable on February 1, 1987 to be one-half of one per cent (/, of 1%) of such prlincipal amount, and each installment thereafter to be one and one-half per cc'.- (1/%) of such priicipal amount. SECTION 2.07. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 3.02 of the Regulations. ARTICLE III Use of the Proceeds of the Credit SECTIoN 3.01. The Borrower shall cause the proceeds of the Credit to be applied in accordance with the provisions 80 of the Development Credit Agreement to expenditures, or to reimbursement of expenditures, for the field sector of the Project described in the Schedule to this Agreement. ARTICLE IV Particular Covenants SECTION 4.01. (a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound agricultural, engineering and financial standards and practices. (b) The Borrower shall take all action which shall be necessary on its part to enable UTGC to perform all its obligations under the Project Agreement and shall not take any action that would interfere with the performance of such obligations by UTGC. (c) The Borrower shall cause UTGC to have experienced and competent management. (d) The Borrower shall consult the Association about any proposed appointment of the Chairman and General Man- ager of UTGC sufficiently in advance of such appointment for the Association to have adequate opportunity to com- ment on it. SECTION 4.02. (a) The Borrower shall relend the part of the proceeds of the Credit withdrawn pursuant to Section 2.03 (a) (i) of this Agreement or the equivalent thereof to TTGC on terms and conditions satisfactory to the Associ- ation pursuant to a loan agreement satisfactory to the Association. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association, and, except as the Association shall otherwise agree, the Borrower shall not amend, assign, abrogate or waive any provision of the Subsidiary Loan Agreement. 9 (c) The Borrower shall at all times make or cause to be made available to UTGC, promptly as needed, all funds and other resources which shall be required for the carrying out of the Project and in particular shall cause to be provided or provide processing facilities for tea and the necessary funds therefor as and when required. (d) The Borrower shall perform all its obligations under the Supervision Agreement and, except with the approval of the Association, shall not amend or abrogate the Super- vision Agreement. SECTION 4.03. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower and the inter- national balance of payments position of the Borrower. (b) The Borrower and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Credit and the maintenance of the service thereof. The Borrower shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accom- plishment of the purposes of the Credit or the maintenance of the service thereof. (c) The Borrower shall afford all reasonable opportunity for accredited represenitatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. SECTION 4.04. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes, and free from all restrictions, imposed under the laws of the Borrower or laws in effect in its territories. S 10 SECTION 4.05. This Agreement, the Project Agreement and the Subsidiary Loan Agreement shall be free from any taxes that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the execution, delivery or registration thereof. SECTIoN 4.06. The Borrower shall construct, as required, and shall maintain all roads necessary to enable UTGC to collect leaf from growers producing tea under the Project and to deliver such leaf to the factories wi-IL are to process it. Such roads shall be constructed and maintained to standards adequate to permit the efficient collection and delivery of such leaf in all but very wet conditions. SECTION 4.07. The Borrower shal, ause UTGC to collect revenue and capital k s on green leaf delivered under the Project for processing at rates agreed from time to time between the Borrower and the Asso 'iation. ARTICLE V Remedies of the Association SECTION 5.01. (i) If any event specified in paragraph (a) or paragraph (c) of Section 5.02 of the Regulations shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (b) of Section 5.02 of the Regulations or in Section 5.02 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower, then at any subsequent time during the continuance thereof the Association, at its option, may declare the principal of the Credit then outstanding to be due and p,ayable immediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement to the contrary notwithstanding. SECTION 5.02. For the purposes of paragraph (k) of Section 5.02 of the Regulations, the following additional events are specified: 11 (a) UTGC shall have failed to perform any covenant or agreement of UTGC under the Project Agreement. (b) Before the Project Agreement shall have terminated ip accordance with its terms, the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of UTGC or for the suspension of its operations. (c) Before the Project Agreement shall have terminated in accordance with its terms, the Uganda Tea Growers Cor- poration Act, 1966 of the Borrower shall have been materi- ally amended without the agreement of the Association. ARTICLE VI Effective Date; Termination SEcrioN 6.01. The following events are specified as additional conditions to the effectiveness of this Agreement within the meaning of Section 8.01 (b) of the Regulations: (a) the execution and delivery of the Project Agreement on behalf of UTGC have been duly authorized or ratified by all necessary corporate and governmental action; (b) the Subsidiary Loan Agreement has been duly executed in form satisfactory to the Association and has become fully effective and binding on the parties thereto in accordance with its terms subject only to the effectiveness of this Agreement; (c) the Government of the Borrower, 'UTGC and CDC have entered into the agreement referred to in Recital (B) hereof (which agreement may be combined with the Sub- sidiiary Loan Agrement) and such agreement has become fully effective and binding on the parties thereto in accord- ance with its terms subject only to the effectiveness of this Agreement; (d) the Uganda Tea Growers Corporation Act, 1966 of the Borrower has been amended to enable the appropriate 12 Minister of the Borrower to make regulations providing for the compulsory registration of tea growers under the said Act; and (e) the regulations referred to in the foregoing para- graph (d) have been duly made in accordance with the said amendment, and all necessary action has been taken to enable UTGC to collect the revenue and capital levies referred to in Section 4.07 of this Agreement. SECTION 6.02. The following are specified as additional matters within the meaning of Section 8.02 (b) of the Regulations, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, UTGC and constitutes a valid and binding obligation of UTGC in accordance with its terms; (b) that the agreements referred to in paragraph (b) and (c) of Section 6.01 of this Agreement have been duly author- ized or ratified by, and executed and delivered on behalf of, the parties thereto and constitute valid and binding obliga- tions of the parties thereto in accordance with their terms; (c) that the Supervision Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the parties thereto and constitutes valid and binding obligations of the parties thereto in accordance with its terms; and (d) that the agreement referred to in Recital (E) of this Agreement has been duly authorized and ratified by, and executed and delivered on behalf of, the parties thereto and constitutes valid and binding obligations of the parties thereto in accordance with their terms. 13 SECTION 6.03. If this Develoment Credit Agreement shall not have come into force and effect by December 15, 1967, this Development Credit Agreement and all obligations of the parties hereunder shall terminate, unless the Associ- ation, after consideration of the reasons for the delay, establishes a later date for purposes of this Section. The Association shall promptly notify the Borrower and UTGC of such later date. SECTION 6.04. Upon termination of the Project Agree- ment in accordance with its terms, the obligations of the Borrower with respect to the Project, UTGC and tea produced or processed under the Project shall forthwith terminate. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be December 31, 1971, or such other date as may from time to time be agreed between the Borrower and the Association. SECTION 7.02. The following addresses are specified for the purposes of Section 7.01 of the Regulations: For the Borrower: Secretary to the Treasury P.O. Box 103 Entebbe, Uganda Cable address: Finsec Entebbe 14 For the Association: International Development Association 1818 H Street, N.W. Washington, D. C. 20433 United States of America Cable address: Indevas Washington, D. C. SECTIOx 7.03. The Minister of the Borrower for the time being responsible for finance is designated for the purposes of Section 7.03 of the Regulations. IN WITNESS WHEREOF, the parties hereto acting through their representatives thereunto duly authorized, have caused this Development Credit Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF UGANDA By s/ ERIFASI OTEMA-ALLIMADI Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By s/ J. BURKE KNAPP Vice President 15 SCHEDULE Description of Project The Project is a part of the smallholder tea development program of UTGC and the Borrower. The Project consists of a field sector and a factory sector. The field sector of the Project, covering 4,000 acres planted prior to January 1, 1966 and approximately 9,700 acres planted or to be planted thereafter, consists of two parts. Part A of the field sector includes the following: (a) the securing, and distribution to qualified small- holders, of wellgrown planting material and the pro- viding of credit to such smallholders for the purchase of such planting material under the planting program for the years 1966 through 1970 specified below, on the basis of up to 100% credit for such planting material for the first five acres of tea planted by any smallholder and up to 50o credit for seedlings for an additional five acres. The planting program is as follows: 1,325 acres in the year ending December 31, 1966, 1,375 acres in the year ending December 31, 1967, 2,320 acres in the year ending December 31, 1968, 2,320 acres in the year ending December 31, 1969 and 2,360 acres in the year ending December 31, 1970. Under this program tea will be planted in the following planting areas: Toro, Ankole, Kigezi, Bunyoro, N.W. Mubende and the Mityaiia, Lugazi an Masaka areas of Buganda; (b) the securing and distribution to qualified small- holders, of fertilizers for immature tea (during the first four years after planting) and the providing of credit to such smallholders for the purchase of fertilizers on the same basis as specified in (a) above; 16 (c) the provision of a training center for smallholders and for staff supervising smallholder tea cultivation in the field; and (d) the organizing and financing of the collection, inspection and transportation to factories of green leaf. Part B of the field sector includes the following: (a) the supervision in the field, through staff to be provided by the Government of the Borrower as provided in the Supervision Agreement, of small- holder tea cultivation and the provision of housing and transportation for such staff; (b) the organization and supervision, through staff pro- vided by the Government of the Borrower, of tea growers' cooperatives; and (c) the training, through staff provided by the Govern- ment of the Borrower, of smallholders either at the training center referred to in sub-paragraph (c) of Part A or in the field. The factory sector of the Project includes the extension of the existing factories and/or the construction and oper- ation of new factories, as needed for the processing of smallholder tea.