Tanzania - Tobacco Processing Project : Credit 0658 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMER 658 TA DEVELOPMENT CREDIT AGREEMENT (Tobacco Processing Project) betwee'a UNITED REPUBLIC OF TANZANIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated September 16, 1976 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated September 16, 1976, between UNITED REPUBLIC OF TANZANIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out by the Tobacco Authority of Tanzania (hereinafter called TAT) and the Tanzania Tobacco Pro- cessing Company Limited (hereinafter called TTPC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to each of them part of the proceeds of the Credit as hereinafter provided; and WHEREAS the Association has agreed, on the basis inter aliL of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and TAT and TTPC; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association being hereinafte.- called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise reqli.res, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Asso- ciation and TAT and TTPC of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; and (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and TAT and TTPC pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsi- diary Loan Agreement. i1) -3- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to eight million dollars ($8,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods or for civil works to be fi- nanced out of the proceeds of the Credit, shall be procured in accordance with the provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. 14- Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each March 15 and September 15 commencing March 15, 1987 and ending September 15, 2026, each installment to and including the installment payable on September 15, 1996 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. -5- ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agree- ment, the Borrower shall cause TAT and TTPC to perform in accor- dance with the provisions of the Project Agreement all the obliga- tions therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable TAT and TTPC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such per- formance. (b) The Borrower shall relend the proceeds of the Credit to TAT and TTPC under a subsidiary loan agreement to be entered into between the Borrower and TA and TTPC under terms and conditions which shall have been approved by the Association and which shall include repayment by TAT in 7 years including 4 years of grace, and by TTPC in 8 years including 3 years of grace, and interest at the rate of 10% per annum. (c) The Borrower shall exercise its rights under the Sub- sidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate, fail to enforce, or waive the Subsidiary Loan Agreement or any provision thereof. -6- Section 3.02. Without limitation or restriction upon the provisions of Section 3.01 (a) hereof, the Borrower shall take or cause to be taken all measures necessary: (i) to enable TAT to retain each year sufficient funds to meet its obligations under the Project Agreement; and (ii) to enable TTPC to charge processing fees at such level as shall be required for TTPC to retain each year sufficient funds to meet its obligations under the Project Agreement. -7- ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) TAT or TTPC shall have failed to perform any of its respective covenants, agreements or obligations under the Project Agreement. (b) An extraordinary situation shall have arisen which shall make it improbable that TAT or TTPC will be able to perform any of its respective obligations under the Project Agreement. (c) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of TAT or TTPC or for the suspension of its respective opera- tions, unless prior thereto the Borrower and the Association shall have agreed on the arrangements to be made in order to replace such entity by an organization which will assume and perform all the obligations of such entity under the Project Agreement upon said dissolution, disestablishment or suspension. (d) The organization, powers or responsibilities of TAT or TTPC shall have been amended so as to materially and adversely affect its management, operations, or financial condition or the carrying out of the Project or the operation of the facilities included in the Project. -8- Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraph (a) or (b) of Section 4.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) any event specified in paragraph (c) or (d) of Section 4.01 of this Agreement shall occur. 0 -9- ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution of the Project Agreement on behalf of TAT and TTPC has been duly authorized or ratified by all necessary corporate and governmental action; and (b) the execution of the Subsidiary Loan Agreement on behalf of the Borrower and TAT and TTPC, respectively, has been duly authorized or ratified by all necessary corporate and governmental action. Section 5.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (b) of the General Con- ditiorn, 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 TAT and TTPC, and is legally binding upon TAT and TTPC in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and TAT and TTPC, respectively, and is legally binding upon the Borrower and TAT and TTPC in accordance with its terms. - 10 0 Section 5.03. The date December 15, 1976 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Article III and the provisions of Article IV of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 25 years after the date of this Agree- ment, whichever shall be the earlier. - 11 - ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of the Borrower at the time respon- sible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Principal Secretary The Treasury P.O. Box 9111 Dar es Salaam United Republic of Tanzania Cable address: Treasury Dar es Salaam 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 614,45 (WUI) 01 -12 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. UNITED REPUBLIC OF TANZANIA By /s/ Hamza Aziz Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amount of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and 4,900,000 100% of foreign machinery expenditures or 90% of local expenditures (2) Storage and infra- 1,400,000 100% of foreign structure facil- expenditures or ities 47% of local expenditures (3) Technical assis- 400,000 100% of foreign tance, training expenditures or and survey 70% of local expenditures (4) Unallocated 1,300,000 TOTAL 8,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in re- spect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $694,000, may be made on account of payments made for such expenditures before that date but after February 1. 1976. - 15 - 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Association may, by notice to the Borrower: (i) reallo- cate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to an- other Category and which in the opinion of the Association are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that fur- ther withdrawals under such Category may continue until all expen- ditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, can- cel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. -16- SCHEDULE 2 Description of the Project The Project consists of: 1. Improvement and expansion of the tobacco processing plant at Morogoro to achieve an operational capacity of about 41 thousand tons of cured leaf per annum, of which about 36 thousand tons will be mechanically processed. This includes improvement and expansion of the existing processing line and installation of a new one. 2. Construction of storage facilities at Morogoro, with an area of about 10,700 m , and one storage facility with an area of about 6,4oo m , including a fumigation chamber, and an office in Dar-es- Salaam. 3. Construction of additional infrastructural facilities at the Morogoro plant site, including improvement and extension of roads in the factory area, storm drainage, railway sidings, water storage and distribution, fencing, installation of telecommunications facilities, provision of fire-fighting equipment, and construction of stores, a training center, and workshops and offices. 4. A program of technical assistance and training of factory staff. 5. A study of additional tobacco processing investment require- ments in Tanzania. * P e The Project is expected to be completed by December 31, 1980.