Lebanon - Electric Power And Irrigation Project : Loan 0129 - Guarantee Agreement - Conformed

LOAN NUMBER 129 LE Guarantee Agreement (Electric Power and Irrigation Projects) BETWEEN REPUBLIC OF LEBANON AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED AUGUST 25, 1955 AGREEMENT, dated August 25, 1955, between the REPUBLIC OF LEBANON (hereinafter called the Guarantor) and IYTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS by an agreement of even date herewith between the Bank and Litani River Authority (hereinafter called the Borrower), which agreement and the schedules therein referred to are hereinafter called the Loan Agreemnt, the Bank has agreed to make to the Borrower a loan in various currencies in an aggregate principal amount equivalent to twenty seven million dollars ($27,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the pay- ment of the principal, interest and other charges on such loan and the obligations of the Borrower in respect thereof; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guarantee the payment of the principal, interest and other charges on such loan and the obligations of the Borrower in respect thereof ; Now THEREFORE the parties hereto hereby agree as fol- lows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated February 15, 1955 (said Loan Regulations No. 4 being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. 4 ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement contained, the Guarantor hereby unconditionally guaran- tees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. (a) Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guar- antor 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 carrying out the Project, to make arrange- ments, 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. (b) The Guarantor shall, if necessary, take appropriate action to make adequate credit available for farm develop- ment and working capital on reasonable terms to farmers within the area serviced by the irrigation facilities to be constructed under the Project. SECTION 2.03. Any funds supplied to the Borrower by the Guarantor pursuant to Section 2.02 (a) or otherwise shall be provided under terms and conditions whereby, if repayment of the prescribed amount thereof is required by the Guarantor, such repayment shall be made in any fiscal year only out of the net income of the Borrower for such year, and only after payment of all other obligations due in that year has been made or provided for and only if the working capital of the Borrower shall not thereby be re- duced below a reasonable level. 5 ARTICLE III SECTION 3.01. It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provi- sions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such piroperty; (ii) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is originally incurred and to be paid out of the pro- ceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. The term "assets of the Guarantor" as used in this Sec- tion includes assets of the Guarantor or of any of its political subdivisions or of any agency of the Guarantor or of any such political subdivision, including the central bank if hereafter created. SECTION 3.02. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan 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 Loan. On the part of the Guarantor, such infformation shall include informa- tion with respect to financial and economic conditions in the territories of the Guarantor and the international balance of payments position of the Guarantor. 6 (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable opportu- nity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. Except as the Bank, the Guarantor and the Borrower shall otherwise agree, the Guarantor shall cause the Borrower to sell all power produced by it, and shall cause the Office de 1'Electricite et du Transport en Commun, its successors and assigns, and other distributors of power owned or controlled by the Guarantor to purchase all power offered to them for sale by the Borrower, at a rate or rates mutually satisfactory to the Borrower, the Guarantor and the Bank. SECTION 3.04. The Guarantor shall cause the Office de 1'Electricite et du Transport en Commun to have the two units of a total installed capacity of 30,000 kw of the Zouk Michael steam plant and adequate distributions facilities ready for operation before the Bisri power plant is ready to operate. SECTION 3.05. Except as the Bank, the Guarantor and the Borrower shall otherwise agree, the Guarantor shall cause the Borrower to establish and maintain rates charged for water uses at a level which, together with any betterment assessment received by the Borrower, shall be sufficient to meet all cost requirements of the irrigation system. SECTION 3.06. The Guarantor covenants that it will not take or permit any of its political subdivisions or any of its 7 agencies or any agency of any political subdivision to take any action which would prevent or interfere with the per- formance by the Borrower of any of the covenants, agree- ments and obligations of the Borrower in the Loan Agree- ment contained, and will take or cause to be taken all rea- sonable action which shall be necessary in order to enable the Borrower to perform such covenants, agreements and obligations. SECTION 3.07. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its ter- ritories; provided, however, that the provisions of this Sec- tion shall not apply to taxation of, or fees upon, payments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.08. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof. SECTION 3.09. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guar- antee on the Bonds to be executed and delivered by the Bor- rower. The Minister of Finance of the Guarantor and such person or persons as he shall designate in writing are desig- nated as the authorized representatives of the Guarantor for the purposes of Section 6.12 (b) of the Loan Regulations. 8 ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Minister of Finance Beirut, Lebanon For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America SECTION 5.02. The Minister of Finance of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee 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 LEBANON By CHARLES MALIK Authorized Representative INTERNATIONAL BANK FOB RECONSTRUCTION AND DEVELOPMENT By EUGENE R. BLACK President