Tanzania - Mwanza Textile Project : Loan 1128 - Loan Agreement - Conformed

CONFORMED COPY S LOAN NUMBER 1128 TA Loan Agreement (Mwanza Textile Project) BETWEEN UNITED REPUBLIC OF TANZANIA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JUNE 19, 1975 CONFORMED COPY LOAN NUMBER 1128 TA Loan Agreement (Mwanza Textile Project) BETWEEN UNITED REPUBLIC OF TANZANIA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JUNE 19, 1975 LOAN AGREEMENT AGREEMENT, dated June 19, 1975, between UNITED REPUBLIC OF TANZANIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) The Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) The Borrower has also requested the Kuwait Fund for Arab Economic Development (hereinafter called the Kuwait Fund) to assist in the financing of the foreign exchange cost of Part A of the Project; (C) The Project will be carried out by Mwanza Textiles Limited (hereinafter called MWATEX) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to MWATEX the proceeds of the Loan as hereinafter provided; and (D) The Bank is willing to make the Loan available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Bank and MWATEX; 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 of the Bank 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 have the respective meanings therein set forth and the following additional terms have the following meanings: 4 (a) "TEXCO" means the National Textile Corporation established under the National Textile Corporation (Establishment) Order, 1973, of the Borrower; (b) "Project Agreement" means the agreement between the Bank, MWATEX and TEXCO of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and MWATEX 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 Subsidiary Loan Agreement; (d) "Subsidiary Loan" means the loan made to MWATEX by the Borrower under the Subsidiary Loan Agreement; (e) "completion" or "completed", when used with respect to the facilities included in Part A of the Project, means that such facilities shall have produced at least 2,900,000 meters of finished textile fabrics over a continuous period of 60 days; and (f) "TSh" means the currency of the Borrower. ARTICLE H The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to fifteen million dollars ($15,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to tiye, for expenditures made (or, if the Bank 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 Loan and in respect of interest and other charges on the Loan. (b) On or before each of the semi-annual interest payment dates specified in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amount allocated, in Schedule 1 to this Agreement, as such Schedule may be amended from time to time. .5 Section 2.03. Except as the Bank shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions set forth or referred to in Section 2.04 of the Project Agreement. Section 2.04. The Closing Date shall be July 1, 1979 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on May I and November I in each year. Section 2.08. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall cause to be carried out Part C of the Project and, without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause MWATEX and TEXCO to perform in accordance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations 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 MWATEX and TEXCO to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Loan (except the portion thereof disbursed by, the Bank for Part C of the Project) to MWATEX under a subsidiary loan agreement to be entered into betw.en the Borrower and MWATEX, 6 under terms and conditions which shall have been approved by the Bank. Except as the Bank shall otherwise agree, such terms and conditions shall include the following: (i) the principal amount of the Subsidiary Loan repayable by MWATEX shall be the equivalent (determined as of the date, or the respective dates, of repayment) of the value of the currency or currencies from the Loan Account expressed in terms of United States dollars at the time of withdrawal; (ii) the Subsidiary Loan shall be repaid in 18 installments over 13 years (including 4-1/2 years of grace); and (iii) MWATEX shall pay interest on the outstanding balance of the Subsidiary Loan at the rate of ten per cent (10%) per annum. Interest due up to and including April 30, 1978 shall be capitalized and repaid pro rata with the installments of the principal amount of the Subsidiary Loan. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (d) Except as the Borrower and the Bank shall otherwise agree, the Borrower (i) shall make available to TEXCO by way of increasing the Borrower's paid-in equity participation in TEXCO by an amount of not less than one hundred million Tanzanian shillings (TShlO0,000,000), and (ii) shall cause TEXCO to make such amount as shall be paid in by the Borrower in accordance with the above sub-paragraph (d)(i) available to MWATEX by way of increasing TEXCO's equity participation in MWATEX for the purpose of assisting MWATEX in financing the carrying out of the Project, such amounts, which shall be provided for in the Borrower's annual budget, to be paid into TEXCO by the Borrower and into MWATEX by TEXCO in accordance with such schedule as shall be required by MWATEX to carry out the Project and comply at all times with the obligations of MWATEX set forth or referred to in the Project Agreement. (e) To the extent that shareholders of MWATEX other than TEXCO increase their paid-in equity participations before completion of Part A of the Project, the obligations of the Borrower set forth in paragraph (d) of this Section shall be reduced pro tanto. 7 (f) In the event that funds are needed to complete the Project in addition to the proceeds of the Loan, the funds made available for the Project by the Kuwait Fund and the funds made available to MWATEX pursuant to the provisions of paragraph (d) hereof, the Borrower shall furnish, or cause to be furnished, such funds to MWATEX pursuant to the provisions of paragraph (a) hereof, in such proportion of debt and equity as shall be consistent with the provisions of Section 4.03 of the Project Agreement. Section 3.02. The Borrower shall take all measures necessary or appropriate to ensure that, after completion of Part A of the Project, MWATEX, operating efficiently, obtains revenues sufficient to cover all of its costs, to service all of its debt and to earn a reasonable return on its invested capital. ARTICLE IV Other Covenants Section 4.01. (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 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 Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect. (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; (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date; and (iii) any charges on the General Fund of the East African Community (hereinafter called the Community) securing a debt of the Community where the amount of the debt service on such debt in any financing year together with other debt service on other debt of the Community payable from such General Fund in such financial year does not exceed 2% of the average of customs duties and excise duties collected by the East African Customs and Excise Department in the three financial years preceding such incurrence. For the purposes of this paragraph, "debt service" shall include payments of the principal of, and interest 8 and other charges on, debt; and any reference to incurring of debt shall include the assumption and guarantee of debt and any renewal, extension or modification of the terms of the debt or of the assumption or guarantee thereof. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall carry out the study included in Part C of the Project. The conclusions of the study will be applied to any major expansion of the textile manufacturing industry. Section 4.03. The Borrower shall cause Tanzania Electric Supply Company Limited to make available, as required, a supply of electric power sufficient to ensure the efficient operation of the MWATEX integrated textile plant. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (k) thereof: (a) MWATEX or TEXCO shall have failed to perform any of their respective covenants, agreements or obligations under the Project Agreement. (b) An extraordinary situation shall have arisen which shall make it improbable that MWATEX or TEXCO will be able to perform 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 disestablishment of MWATEX or for the suspension of its operations. (d) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the loan made to the Borrower by the Kuwait Fund for the financing of the Project shall have been 9 suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower, of MWATEX or of TEXCO to perform any of their respective obligations under such agreement, and (B) adequate funds for the Project are available to the Borrower and to MWATEX from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement and of MWATEX under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following events are specified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of thirty days after notice thereof shall have been given by the Bank to the Borrower and MWATEX; and (b) any event specified in paragraphs (b), (c) or (d)(i)B of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of MWATEX and TEXCO have been duly authorized or ratified by all necessary corporate and governmental action; 10 (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and MWATEX, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (c)(i) The execution and delivery of a loan agreement on behalf of the Kuwait Fund and the Borrower for the provision to the Borrower of an amount of four million five hundred thousand Kuwaiti dinars (KD4,500,000) for the purpose of assisting in financing the foreign exchange cost of Part A of the Project have been duly authorized by all necessary corporate and governmental action, and all conditions precedent to the effectiveness of said loan agreement or the right to make withdrawals thereunder or to receive goods and services thereunder, except only the effectiveness of said loan agreement, shall have been fulfilled, and (ii) the Borrower shall have entered into a loan agreement with MWATEX providing for the on-lending of the proceeds of the Kuwait Fund loan to MWATEX for such purpose; and (d) MWATEX shall have increased its authorized capital to one hundred and twenty million Tanzanian Shillings (Tsh120,000,000). Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02(c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, MWATEX and TEXCO, and is legally binding upon MWATEX and TEXCO in accordance with its terms; (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and MWATEX, respectively, and is legally binding upon the Borrower and MWATEX in accordance with its terms; and (c) That the authorized capital of MWATEX has been duly increased to the amount set forth in paragraph (d) of Section 6.01 of this Agreement. Section 6.03. The date September 29, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. 11 ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. 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 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 12 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 / Paul Bomani Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Eastern Africa 13 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan to each Category: Amount of the Loan Allocated (Expressed in Category Dollar Equivalent) (1) Equipment and materials 9,000,000 for Part A of the Proj- ect (other than for spin- ning plant) (2) Engineering services 1,100,000 and technical advisors under Part A of the Project and staff training under Part B of the Project (3) Study under Part C 200,000 of the Project (4) Interest and other 1,500,000 charges on the Loan accrued on or before April 30, 1978 (5) Unallocated 3,200,000 TOTAL 15,000,000 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; 14 (b) expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category 2 on account of expenditures incurred after April 1, 1975, in an amount not exceeding the equivalent of $150,000; and (c) 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. 3. Notwithstanding the allocation of an amount of the Loan set forth in the second column of the table in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance all expenditures in that Category, the Bank may, by notice to the Borrower, reallocate to such Category, to the extent required to meet such estimated shortfall, proceed) of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures. 4. If the Bank 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 expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. 15 SCHEDULE 2 Description of the Project The Project is designed to expand MWATEX's textile production facilities near the city of Mwanza. The Project consists of the following Parts: Part A: Integrated Textile Plant The construction and equipping of an integrated textile plant near the city of Mwanza to produce about 20 million linear meters of finished cotton fabrics per year, such plant to include about 28,000 spindles, about 600 looms as well as the necessary bleaching, mercerizing, dyeing and printing equipment. Part B: Staff Training The carrying out of a training program acceptable to the Borrower, the Bank, TEXCO and MWATEX, designed to train a sufficient number of qualified staff members of MWATEX in textile technology and operations for the purpose of enabling them to operate the facilities included in Part A of the Project upon their completion. Part C. Study The carrying out of a study of the possibilities of marketing textiles manufactured in Tanzania in other countries including the study of the feasibility of constructing in Tanzania a textile plant for the production of polyester-cotton blended materials. The facilities included in Part A of the Project are expected to start commercial operation in early 1978. 16 SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* November 1, 1980 205,000 May 1, 1981 215,000 November 1, 1981 220,000 May 1, 1982 230,000 November 1, 1982 240,000 May 1, 1983 250,000 November 1, 1983 265,000 May 1, 1984 275,000 November 1, 1984 285,000 May 1, 1985 295,000 November 1, 1985 310,000 May 1, 1986 325,000 November 1, 1986 335,000 May 1, 1987 350,000 November 1, 1987 365,000 May 1, 1988 380,000 November 1, 1988 400,000 May 1, 1989 415,000 November 1, 1989 435,000 May 1, 1990 450,000 November 1, 1990 470,000 May 1, 1991 490,000 November 1, 1 991 510,000 May 1, 1992 535,000 November 1, 1992 555,000 May 1, 1993 580,000 November 1, 1993 605,000 May 1, 1994 630,000 November 1, 1994 655,000 May 1, 1995 685,000 November 1, 1995 715,000 May 1, 1996 745,000 November 1, 1996 775,000 May 1, 1997 805,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 17 Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years 1-1/4% before maturity More than three years but 2-1/2% not more than six years before maturity More than six years but not 4-1/2% more than eleven years before maturity More than eleven years but 6-3/4% not more than sixteen years before maturity More than sixteen years but not 7-1/2% more than twenty years before maturity More than twenty years 8-1/2% before maturity