Zambia - Telecommunications Project : Loan 1131 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1131 ZA Loan Agreement (Telecommunications Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND POSTS AND TELECOMMUNICATIONS CORPORATION DATED JUNE 24, 1975 CONFORMED COPY LOAN NUMBER 1131 ZA Loan Agreement (Telecommunications Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND POSTS AND TELECOMMUNICATIONS CORPORATION DATED JUNE 24, 1975 LOAN AGREEMENT AGREEMENT, dated June 24, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and POSTS AND TELECOMMUNICATIONS CORPORATION (hereinafter called the Borrower). WHEREAS (A) The Borrower is a statutory corporation duly organized and existing under the Posts and Telecommunications Corporation Act, 1975 (hereinafter called the Act) of the Republic of Zambia (hereinafter called the Guarantor); (B) By the terms of the legislation referred to in Recital A there shall vest in the Borrower, on a vesting date to be fixed in accordance with the Act, all the property, rights, liabilities and obligations which immediately before the vesting date were the property, rights, liabilities and obligations of the General Post Office of Zambia, a department of the Ministry of Power, Transport and Works of the Guarantor, or the Government in connection with postal and telecommunications services; (C) The Guarantor and the Borrower have requested the Bank to assist in the financing of Part I of the Project described in Schedule 2 of this Agreement by making the Loan as hereinafter provided; (D) The Guarantor has entered into a loan agreement with the African Development Bank (hereinafter called the ADB Loan Agreement), dated November 8, 1974, by which the ADB has agreed to make a loan in an aggregate amount equivalent to four million two hundred thousand units of account (U.A.4,200,000) (as defined in Article 5(1) of the Agreement establishing the African Development Bank) (hereinafter called the ADB Loan) for the purpose of assisting in the financing of the Lusaka-Kasama-Nakonde micro-wave link included under Part II of the Project, and the Guarantor has agreed to relend to the Borrower the proceeds of the ADB Loan; (E) The Guarantor has entered into an agreement dated April 12, 1974 with the Government of the Kingdom of Sweden (hereinafter called the SIDA Agreement) by which the Swedish Government has agreed to provide financial assistance to the Guarantor to assist in the modernization of the Guarantor's telecommunications sector, including an amount not exceeding eleven million seven hundred thousand Swedish Krona (S.Kr. 11,700,000) (hereinafter called the SIDA 4 Grant) for the purpose of assisting in the financing of the trunk and international switching equipment included under Part II of the Project, and the Guarantor has agreed to lend to the Borrower the proceeds of the SIDA Grant; (F) The Guarantor has agreed to lend to the Borrower for the purposes of the Project, on terms and conditions satisfactory to the Bank, in such currencies as may be required, (i) an amount equivalent to Kl7 million (representing the presently estimated financing gap for the Project after taking into account the other sources of financing presently available for the Project) and (ii) all such additional amounts (if any) as are required by the Borrower to enable it to meet expenditures incurred or to be incurred for purposes of the Project; (G) The Guarantor has agreed, inter alia, to guarantee all of the obligations of the Borrower under this Loan Agreement, in accordance with the terms and conditions of a Guarantee Agreement of even date herewith between the Guarantor and the Bank; and WHEREAS The Bank has agreed, on the basis, inter alia, of the foregoing, to make a loan to the Borrower upon the terms and conditions hereinafter set forth; 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: (a) "ADB" means the African Development Bank, and includes any successor thereto; (b) "SIDA" means the Swedish International Development Authority, an agency of the Government of the Kingdom of Sweden, and includes any successor thereto; 5 (c) "GPO" means the General Post Office of Zambia, a department within the Ministry of Power, Transport and Works of the Guarantor prior to the establishment of the Borrower; (d) "Act" means the Posts and TelecoM.munications Corporation Act, 1975, of the Guarantor; and (e) "Kwacha" means the currency of the Guarantor. ARTICLE II 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 thirty-two million dollars ($32,000,000). Section 2.02. 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 time, for expenditures inade (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. Section 2.03. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan, shall be awarded in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such other date as shall be agreed between the Bank and the Borrower. 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 1 and November 1 in each year. 6 Section 2.08. The Borrower shall repay the principal amount 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. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate engineering, public utility, administrative and financial practices. Section 3.02. (a) In order to assist the Borrower (i) to carry out planning and detailed engineering for the Project, (ii) in the preparation of bidding documents, and (iii) in evaluating bids, inter alia, for the procurement of equipment required for the Project, the Borrower shall employ telecommunications consultants whose qualifications, experience and contract of employment shall be mutually satisfactory to the Borrower and the Bank. (b) If the Borrower shall not have at the required time a staff of its own with adequate qualifications and experience for the purpose, in order to assist the Borrower in the supervision of installation and commissioning of the switching equipment required for the Project, the Borrower shall employ telecommunications consultants whose qualifications, experience and contract of employment shall be mutually satisfactory to the Borrower and the Bank. Section 3.03. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall obtain title to all goods financed out of the proceeds of the Loan free and clear of encumbrances. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.05. (a) The Borrower shall furnish to the Bank, upon their preparation, the plans, specifications, contract documents and work and 7 procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any records and documents relevant thereto; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) The Borrower shall enable the Bank's representatives to inspect relevant plant, installations, sites, works, buildings, and records of the Borrower for purposes of supervising the Project and the implementation thereof. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall (i) except as the Bank shall otherwise agree, take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its telecommunications operations; (ii) operate and maintain, or cause to be operated and maintained, all its plants, equipment and property used in its telecommunications operations and from time to time make, or cause to be made, all necessary renewals and repairs thereof, all in accordance with sound engineering, public utility, administrative and financial practices; and (iii) at all times manage its affairs, plan its future expansion and maintain its financial position in accordance with sound engineering, public utility, administrative and financial practices and under the supervision of qualified and competent management. Section 4.02. The Borrower shall at all times (i) render its accounts due for telecommunications services promptly after the close of each service period, and (ii) take all necessary measures required on its part to ensure that all such accounts are settled on a current basis. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. 8 (b) Without limitation or restriction on the provisions of Section 5.01(a), the Borrower shall maintain separate accounts in respect of its postal and telecommunications operations. Section 5.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of changes in financial position, and statements of income and expenses) for its fiscal year 1975 and each fiscal year thereafter, audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than eight months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. Except as the Bank shall otherwise agree, the Borrower shall take or cause to be taken, from time to time, all necessary steps within its power as shall be required to provide from its telecommunications operations revenues sufficient to produce for its fiscal year 1976 and thereafter an annual rate of return of not less than 11%. 9 For the purposes of this Section: (i) the annual rate of return shall be calculated by relating the net operating income for the year in question to the average of the value of the net fixed assets of the Borrower in operation at the beginning and at the end of that year; (ii) the term "value of net fixed assets in operation" shall mean the gross value of such assets, used for telecommunications services, less the amount of accumulated depreciation, both as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Bank; and (iii) the term "net operating income" shall mean the difference between: (a) gross operating revenue accruing from the Borrower's telecommunications services; and (b) the operating, maintenance and administration expenses, taxes (if any), or any payments in lieu thereof, and adequate provision for depreciation (based on the rates as will be determined in accordance with Section 5.07 of this Agreement) but excluding interest and other charges on debt, all attributable to the Borrower's telecommunications services. Section 5.05. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt in respect of its telecommunications operations unless the net revenues of the Borrower in respect of such operations for the fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever is the greater, shall be not less than 1.4 times the maximum debt service requirements for any succeeding fiscal year on all the debt of the Borrower incurred in respect of such operations, including the debt to be incurred. For the purposes of this Section: (a) the term "debt" means all debt, including debt assumed or guaranteed by the Borrower, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after its incurrence, and except guarantees of loans made to its employees in accordance with Section 17(3)(p) of the Act; 10 (b) the term "incur" with reference to any debt includes any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (i) under a contract or loan agreement, on the date the loan contract or agreement providing for such debt is entered into, and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee shall have been entered into; (c) the term "net revenues in respect of telecommunications operations" means gross operating revenues of the Borrower derived from its telecommunications operations, adjusted to take account of rates for telecommunications services in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal year or twelve-month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, or any payments in lieu thereof, and administrative expenses, but before provision for depreciation and debt service requirements, all in respect of the Borrower's telecommunications operations; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt of the Borrower; and (e) whenever it shall be necessary to value in the currency of the Guarantor debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by the Borrower, at the time such valuation is made, for the purposes of servicing such debt, or, if such other currency is not obtainable, at the rate of exchange that will be reasonably determined by the Bank. Section 5.(6. Except as the Bank shall otherwise agree, the Borrower shall (i) take all necessary steps to ensure that the study being undertaken by its accounting consultants shall be completed by September, 1975; (ii) consult with the Bank following the completion of said study regarding the findings and recommendations thereof; and (iii) with the assistance of said consultants, implement, according to a time schedule to be agreed between the Borrower and the Bank, those recommendations of said consultants as shall be mutually acceptable to the Borrower and the Bank. Section 5.07. Except as the Bank shall otherwise agree, the Borrower shall, in respect of its telecommunications operations: (i) carry out a review of its depreciation rates, and of the adequacy of its depreciation reserves; and (ii) within six months of the date of this Agreement, implement such changes in its depreciation rates and reserves and thereafter maintain such rates and reserves as are required to ensure that annual depreciation charges are realistically related to 11 the economic lives of telecommunications assets, and that accumulated depreciation reserves appropriately reflect the revised depreciation rates. Section 5.08. Except as the Bank shall otherwise agree, the Borrower (i) shall not, until the completion of the Project, pay any dividends; and (ii) shall not apply funds arising out of or obtained in connection with its telecommunications operations, for purposes other than its telecommunications operations, unless such funds are surplus to the Borrower's operational, debt service, and investment requirements, including the maintenance of adequate reserves, in respect of its telecommunications operations. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) the Borrower's right to utilize the proceeds of the ADB Loan shall have been suspended or terminated in whole or part and alternative financing arrangements satisfactory to the Bank for the financing of the Lusaka-Kasama-Nakonde microwave link included under Part II of the Project shall not have been made; (b) the Borrower's right to utilize the proceeds of the SIDA Grant shall have been suspended or terminated in whole or part and alternative financing arrangements satisfactory to the Bank for the financing of the trunk and international switching equipment included under Part II of the Project shall not have, been made; (c) the Borrower's right to make withdrawals under the agreement referred to in Recital (F) of this Agreement shall have been suspended or terminated in accordance with the terms thereof; (d) any other loan to the Borrower (including any obligation assumed by the Borrower, and including any securities issued in connection with any such loan or obligation) shall have become due and payable prior to its agreed maturity pursuant to the terms thereof; and (e) a substantial change shall have been made in the Act so as to affect adversely the ability of the Borrower to carry out its obligations under the Loan Agreement, or to affect adversely the organization, operations or financial condition of the Borrower. 12 Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (e) of Section 6.01 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 the Guarantor; and (b) any event specified in paragraphs (a), (b), (c) or (d) of Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. 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) all conditions precedent to the effectiveness of the ADB Loan Agreement, referred to in Recital (D) hereof, shall have been satisfied, and the Guarantor and the Borrower shall have entered into a relending agreement in form and substance satisfactory to the Bank for the relending to the Borrower of the proceeds of the ADB Loan, or alternative arrangements satisfactory to the Bank shall have been made for the financing of the micro-wave link between Lusaka, Kasama and Nakonde included under Part C of the Project; (b) all conditions precedent to the effectiveness of the SIDA Agreement, referred to in Recital (E) hereof, shall have been satisfied, and the Guarantor and the Borrower shall have entered into an agreement in form and substance satisfactory to the Bank for the lending to the Borrower of the proceeds of the SIDA Grant, or alternative arrangements satisfactory to the Bank shall have been made for the financing of the trunk and international telephone switching equipment included under Part II of the Project; (c) the Guarantor and the Borrower shall have entered into an agreement in form and substance satisfactory to the Bank providing for the Guarantor to make to the Borrower the loans referred to in Recital (F) of this Agreement; (d) all necessary governmental and corporate action shall have been taken for the vesting in the Borrower of the property, rights, liabilities and obligations of the GPO, or the Government in connection with postal and telecommunications services; and 13 (e) the Guarantor shall have prepared recommendations for the initial capitalization of the Borrower acceptable to the Bank and shall have agreed with the Bank on a time-table for their implementation. Section 7.02. The date September 22, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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. For the Borrower: Posts and Telecommunications Corporation P. 0. Box 1630 Ndola Zambia Cable address: POSTS AND TELECOMMUNICATIONS CORPORATION NDOLA 14 IN 77ITNESS WHEREOF, the parties hereto, acting through their representatiL. thereunto duly authorized, have caused this Agreement to be signed in their respecti :t names in the District of Columbia, United States of America, as of the day anL "ear first above written. TERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s / S. Shahid Husain Regional Vice President Eastem Africa POSTS AND TELECOMMUNICATIONS CORPORATION By /s / W. B. Silweya Authorized Representative 15 SCHEDULE I Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Subscriber and 5,250,000 100% of foreign or junction cables local expenditures and associated (c.i.f. cost of im- plant items ported items or ex- factory cost of locally manufac- tured items) (2) Local telephone 8,730,000 ) exchange equip- ) ment (including ) installation) ) (3) Subscriber appara- 1,040,000 ) 100% of foreign tus and PABX ) expenditures (including installa- ) tion for PABX) ) (4) Microwave systems, 9,290,000 ) UHF/VHF radio sys- ) tems, long distance ) cables and multi- ) plexing equipment ) (including installa- ) tion) ) (5) Vehicles 390,000 (6) Consultants' 400,000 ) services ) (7) Unallocated 6,900,000 TOTAL 32,000,000 16 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of Zambia and for goods or services supplied from Zambia. 3. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by or in Zambia, on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if any event occurs which shall affect the amount of any such taxes included in the cost of any item to be financed out of the proceeds of the Loan, the Bank may, by notice to the Borrower, correspondingly adjust the disbursement percentage then applicable to such item. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made: (i) in respect of expenditures prior to January 1, 1975; and (ii) in respect of expenditures for the Lusaka-Kasama-Nakonde micro-wave link to be provided under Part II of the Project (which is to be financed under the ADB Loan Agreement referred to in Recital (D) of this Agreement), trunk and international switching equipment (which is to be financed under the SIDA Agreement referred to in Recital (E) of this Agreement), and other equipment or works financed in whole or in part from suppliers' credits or other external sources, and consultants' services financed in whole or part from external sources. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in 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 the agreed percentage of all expenditures in that Category, the Bank may, in consultation with the Borrower: (i) reallocate to such Category to the extent required to meet the estimated shortfall proceeds 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, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then 17 applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. 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. 18 SCHEDULE 2 Description of the Project The Project is the current development program of the Zambian telecommunications network, other than works completed or on-going works for which commitments have been entered into as of January 1, 1975, and consists of the following Parts: Part I . Investments Financed Partly by the Bank. A. Purchase and installation of local telephone exchange equipment for about 31,000 lines, including replacement of worn out equipment for about 7,900 existing lines, giving a net addition of about 23,100 lines. B. Expansion of the cable and subscriber distribution networks to provide about 31,000 additional connections; and purchase and installation of private automatic branch exchanges (including a 1,000 line PABX in Lusaka for the Government) and associated subscriber apparatus. C. Expansion of the long distance network including provision and installation of microwave links between Lusaka and Chipata, and between Livingstone and Mongu; construction of about 2,500 km of VHF/UHF radio links; and addition of multiplex equipment on existing and new routes to provide about 2,200 additional long distance circuits. D. Extension of gentex service to about 25 additional localities which are at present served by means of point-to-point telegraph circuits. Part II. Investments Financed Partly by ADB and SIDA. A. Provision and installation of a Lusaka-Kasama-Nakonde microwave link, to be financed partly with the assistance of ADB. B. Purchase and installation of (i) new trunk switching centers in Ndola, Kitwe, Lusaka and Livingstone; and (ii) an international telephone switching center in Lusaka, to be financed partly with the assistance of SIDA. The Project is expected to be completed by December 31, 1980. 19 SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due ( expressed in dollars)* November 1, 1979 490,000 May 1, 1980 510,000 November 1, 1980 530,000 May 1, 1981 555,000 November 1, 1981 575,000 May 1, 1982 600,000 November 1, 1982 625,000 May 1, 1983 655,000 November 1, 1983 680,000 May 1, 1984 710,000 November 1, 1984 740,000 May 1, 1985 770,000 November 1, 1985 805,000 May 1, 1986 840,000 November 1, 1986 875,000 May 1, 1987 910,000 November 1, 1987 950,000 May 1, 1988 990,000 November 1, 1988 1,030,000 May 1, 1989 1,075,000 November 1, 1989 1,120,000 May 1, 1990 1,170,000 November 1, 1990 1,220,000 May 1, 1991 1,270,000 November 1, 1991 1,325,000 May 1, 1992 1,380,000 November 1, 1992 1,440,000 May 1, 1993 1,500,000 November 1, 1993 1,565,000 May 1, 1994 1,630,000 November 1, 1994 1,700,000 May 1, 1995 1,765,000 * 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. 20 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 before maturity 1-1/4% More than three years but not more than six years before maturity 2-1/2% More than six years but not more than eleven years before maturity 4-1/2% More than eleven years but not more than sixteen years before maturity 6-3/4% More than sixteen years but not more than eighteen years before maturity 7-1/2% More than eighteen years before maturity 8-1/2% 21 SCHEDULE 4 Procurement A. General Procedures Contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Cables specified under Category 2 of the allocation of the proceeds of the Loan, as set forth under paragraph I of Schedule 1 to this Agreement, and manufactured in Zambia, may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Zambia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Zambia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Zambia. 22 (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. The lowest evaluated bid of each group shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be deemed to be the most advantageous bid; if not, the lowest evaluated bid from group C shall be deemed to be the most advantageous bid. C. Review of Procurement Decisions by Bank 1. Review of invitation to bid and of proposed awards and final contracts: With respect to all contracts for goods estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) Promptly after the bids have been received, the Borrower shall inform the Bank of the names of the bidders and the respective amounts of the bids. (c) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder 23 to which it intends to award the contract and the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.02(a) of this Agreement, on the evaluation and comparison of the bids received, together with the recommendation for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (d) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (e) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination.