CONFORMED COPY CREDIT NUMBER 833 TA Development Credit Agreement (Horogoro Textile Project) between UNITED REPUBLIC OF TANZANIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated July 28, 1978 CREDIT NUMBER 833 TA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated July 28, 1978, between UNITED REPUBLIC OF TANZANIA (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association.) WHEREAS (A) the Borrower has requested the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the Association to assist in the financing of the Project described in Schedule 2 to this Agreement; (B) the Borrower has requested other sources to assist in the financing of the Project; (C) the Project will be carried out by Morogoro Polyester Textiles Limited (hereinafter called the Company) and the Bor- rower's National Textile Corporation (hereinafter called TEXCO) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Company, pursuant to the provisions of a subsidiary loan agreement a part of the proceeds of the Credit as hereinafter provided and the proceeds of the loan to be provided under a Loan Agreement of even date herewith between the Borrower and the Bank; and (D) the Association has agreed, on the basis inter alia 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 among the Bank, the Association, the Company and the National Textile Corporation; 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 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 Agreements of the Association being hereinafter called the General Conditions). -2- Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General 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) "Loan" means the loan under the Loan Agreement; (b) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the purpose of the Project, as such agreement may 'be amended from time to time; and such term includes the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, as made applicable to such agreement, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement; (c) "Project Agreement" means the agreement among the Bank, the Association, the Company and TEXCO of even date here- with, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; and (d) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Company 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. 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 twenty million dollars ($20,000,00r'. 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, 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. -3- Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions set forth or referred to in Section 2.05 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1985, or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. 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 semiannually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each April 1 and October 1 commencing October 1, 1988, and ending April 1, 2028, each installment to and including the installment payable on April 1, 1998, 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. 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 Agreement, the Borrower shall cause the Company and TEXCO to perform in accordance with the provisions of the Project Agree- ment and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the prozision of funds, facilities, services and other resources, necessary or appropriate to enable the Company 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. -4- (b) The Borrower shall (i) relend $8,500,000 equivalent of the proceeds of the Credit and the entire proceeds of the Loan to the Company under a subsidiary loan agreement to be entered into between the Borrower and the Company under terms and conditions acceptable to the Bank and the Association which shall include the following: repayment over 15 years inclusive of 4-1/2 years of grace; the rate of interest to be ten per cent per annum; foreign exchange risk to be borne by the Company; and (ii) make available (A) to TEXCO $2,000,000 equivalent of the proceeds of the Credit, and (B) to TEXCO to be made available to the Company as an equity contribution $9,500,000 equivalent of the proceeds of the Credit. (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 Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (d) Without limitation on subparagraph (a) above, the Borrower shall furnish, or cause to be furnished, to the Company about $32,600,000 equivalent as equity in accordance with Schedule 3 to this Agreement and such other funds as necessary to complete the Project in such proportion of debt and equity as shall be consistent with 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, the Company, operates efficiently, which for these purposes includes satisfactory arrangements for (a) timely pro- curement of imported raw materials, maintenance materials and spare parts, (b) sale and distribution of finished products, and (c) at efficient operations obtains revenues sufficient to cover all of its costs, to service all of its debt and to earn a reason- able return on its invested capital which shall include share capital, retained earnings plus long-term debt including the current portion thereof. SeLtion 3.03. The Borrower shall take appropriate measures to ensure that upon completion of Part A of the Project there are adequate supplies of power and water to serve the Project mill. Section 3.04. The Borrower shall provide, or cause to be provided, in a timely fashion adequate sites and services for housing facilities for the Project's workers. -5- ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 ff the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) the Company or TEXCO shall have failed to perform any of their respective obligations under the Project Agreement; (b) the organization, powers or responsibilities of the Com- pany or TEXCO shall have been terminated or altered so as to affect materially and adversely the carrying out by the Company or TEXCO of their respective obligations under the Project Agreement; (c) (i) subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower or the Company to withdraw the proceeds of any loan made to the Borrower or the Company for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower or the Company to perform any of its obligations under such agreement, and (B) adequate funds for the Project are available to the Borrower or the Company from other sources on terms and conditions consistent with the obliga- tions of the Borrower under this Agreement and of the Company under the Project Agreement. 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) of Section 4.01 of this Agreement shall occur and shall continue for a period of 30 -6- days after notice thereof shall have been given by the Association to the Borrower and the Company; and (b) any event specified in paragraphs (b) and (c) (i) (B) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and the Company; (b) all the conditions t the effectiveness of the Loan Agreement have been met; (c) the Association shall be satisfied that the other sources of financing referred to in the clause (B) of the Preamble to this Agreement are adequate to carry out the Project and that all agreements providing for such financing are in full force and effect! and (d) the project advisory firm and the project engineering firm referred to in Section 2.02 (a) of the Project Agreement, and the technical management firm referred to in Section 2.03 (a) of the Project Agreement shall have been employed in accordance with the provisions of such Sections. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, 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 the Company and TEXCO, and is legally binding upon the Company and TEXCO in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and the Company and is legally binding upon the Borrower and the Company in accor- dance with its terms; and -7- (c) each agreement referred to in Section 5.01 (c) hereof has been duly authorized or ratified by the Borrower, the Company and TEXCO, as the case may be, and is legally binding upon the Borrower, the Company and TEXCO, as the case may be, in accordance with its terms. Section 5.03. The date November 28, 1978 is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Sections 3.02, 3.03, and 4.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agree- ment, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. 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 Con- ditions. Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance and Planning P. 0. Box 9111 Dar es Salaam 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 -8- Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. UNITED REPUBLIC OF TANZANIA By /s/ Paul Bomani Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Hans A. Adler Acting Regional Vice President Eastern Africa it -9- SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and 16,000,000 100% of foreign spares expenditures (2) Civil works 8,500,000 15% of foreign expenditures and 78% of lo- cal expenditures (3) Technical assis- 6,700,000 100% of foreign tance, engineer- expenditures ing services and study and training (4) Interest and other 3,600,000 100% charges on the Loan accrued on or before October 1, 1981 (5) Imported raw materials 5,500,000 100% of foreign expenditures (6) Unallocated 4,700,000 TOTAL 45,000,000 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 - 10 - 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 com- pliance with the policy of the Bank and the Association that no proceeds of the Loan and 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, manu- facture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan or the Credit decreases or increases, the Bank or 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 Bank and 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 $500,000 may be made in respect of Category (3) on account of payments made for such expenditures before that date but after March 1, 1978. In addition, except as the Borrower, the Bank and the Asso- ciation shall otherwise agree, and until all amounts of the Credit shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 5. Notwithstanding the allocation of an amount of the Loan or of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank or the Association has reason- ably estimated that the amount of the Loan or of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank or the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan or of the Credit, as the case may be, which are then allocated to another Category and which in the opinion of the Bank or the Association are not needed to meet - 11 - 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 further with- drawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank or the Association shall have reasonably deter- mined that the procurement of any item in any Category is incon- sistent 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 or of the Credit and the Bank or the Association may, without in any way restricting or limiting any other right, power or remedy of the Bank or of the Association under the Loan Agreement or the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Loan or of the Credit as, in the Bank's or 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 Loan or of the Credit. - 12 - SCHEDULE 2 Description of the Project The Project consists of the following Parts: Part A: The construction and equipping of an integrated textile mill, near the town of Morogoro, with spinning, weaving and processing facilities to produce about 21.5 million m2 per year of blended fabrics and an additional 650 tons of yarn, such mill to include about 42,000 ring spindles and about 660 automatic shuttle looms and finishing facilities with devices to ensure product quality, and including the necessary ancillary and support facilities. Part B: The establishment of a mill training center and the carrying out of a training program designed to train a sufficient number of qualified staff members of the Company in textile technology and operations for the purpose of enabling them to operate the faci- lities included in Part A of the Project efficiently. Part C: The strengthening of the operational efficiency of existing textile mills in TEXCO's group of companies, including a study to be carried out by TEXCO to identify problems, ascertain the adequacy of improvement programs and recommend changes, if neces- sary. The facilities included in Part A of the Project are expected to start commercial operation in January 1982. - 13 - SCHEDULE 3 Schedule of Equity Contributions to the Company from the Borrover's Funds Dollar Equivalent (Millions) to be Allocated Year in Equal Quarterly Instalments 1978 4.0 1979 12.6 1980 12.0 1981 4.0 32.6