Morocco - Oil Shale Engineering Project : Loan 2114 - Loan Agreement - Conformed

OFCIAN LOAN NUMBER 2114-MOR DOCUMENTS Loan Agreement (Oil Shale Engineering Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and OFFICE NATIONAL DE RECHERCHES ET D'EXPLOITATIONS PETROLIERES Dated , 1982 LOAN NUMBER 2114-MOR LOAN AGREEMENT AGREEMENT, dated A " tK ,1982, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and OFFICE NATIONAL DE RECHERCHES ET D'EXPLOITA- TIONS PETROLIERES (hereinafter called the Borrower), an etablis- sement public a caractZre industriel et commercial established and operating under the laws of the Kingdom of Morocco (herein- after called the Guarantor or Morocco). WHEREAS (A) the Guarantor and the Borrower have 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) by an agreement (hereinafter called the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee certain obligations of the Borrower in respect of the Loan and to provide the Borrower with funds and other support for Parts A through D of the Project; and (C) any financing so provided by the Bank would be refunded, if the Bank shall so request, out of the proceeds of any loan by the Bank which may later be granted to the Borrower for the development and exploitation of oil shale resources covered by the Project; WHEREAS the Bank is willing, on the basis, inter alia, of the foregoing, to make a loan to the Borrower on 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 October 27, 1980, 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). - 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) "ONAREP Legislation" means collectively the Dahir No. 1-81-345 of November 10, 1981, and any d6cret or arr8t6 or other mesure r6glementaire issued pursuant to, or in con- nection with, such Dahir. (b) "Riglement Minier" means collectively the Dahir of April 16, 1951, the DScret No. 2.57.1647 of December 17, 1957, the Arretg viziriel of April 21, 1951, and the Instruction minist6rielle of February 25, 1960. (c) "Code des Hydrocarbures" means collectively the Dahir of April 16, 1951, the ArritS viziriel of April 16, 1951, the Dahir No. 1-58-227 of July 21, 1958, and the Dfcrets d'application No. 2-58-879, 2-58-876 and 2-58-878, all of July 23, 1978. (d) "Specific Projects Debt" means any loan(s) granted by the Bank to the Borrower or any other loan(s) which the Borrower might contract for the purposes of a project or projects financed by the Bank, other than advances or contributions made by the Guarantor. (e) "subsidiary" means any corporation, a majority of whose outstanding voting stock shall be owned, or which shall be effec- tively controlled, by the Borrower or by one or more subsidiaries of the Borrower or by the Borrower and one or more of its sub- sidiaries. 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 fotth or referred to, an amount in various currencies equivalent to twenty million dollars ($20,000,000). - 3 - 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 by agreement between the Bank and the Borrower, for expendi- tures 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. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and works to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be September 30, 1986, or such later date as the Bank shall establish. The Bank shall promptly notify the Guarantor and 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 oa the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) 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 semiannually on June 15 and December 15 in each year. 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 Parts A through D of the Project Section 3.01. (a) The Borrower shall carry out Parts A through D of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engi- neering practice-. -4- (b) The Borrower shall not undertake the initial operation of the test station included in Part A of the Project until: (i) a detailed test program shall have been submitted by the Borrower to the Bank for its review and approval, and such approval shall have been notified by the Bank to the Borrower; and (ii) a safety audit of the test station shall have been carried out, under terms and conditions satisfactory to the Bank. (c) The Borrower (i) shall make available to the Guarantor, out of the proceeds of the Loan, an amount equivalent to two hundred thousand dollars ($200,000) or such other amount or amounts as may be allocated from time to time to Category (3) (b) of the table set forth in paragraph 1 of Schedule 1 to this Agreement for Part E of the Project, under arrangements acceptable to the Guarantor, the Borrower and the Bank, and (ii) shall take all action, within its powers, as shall be necessary or useful on its part to assist the Guarantor in carrying out Part E of the Project. Section 3.02. (a) In order to assist the Borrower: (i) in carrying out Parts A and D of the Project, the Borrower shall continue to employ engineering consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank; (ii) in carrying out Parts B and C (a) of the Project, the Borrower shall, by August 1, 1982 (or such other date as the Bank may agree), employ .onsultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank; and (iii) in carrying out Part C (b) of the Project, the Borrower shall, by June 30, 1984 (or such other date as the Bank may agree), employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank. The employment of all such consultants shall be mare in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency", published by the Bank in August 1981. (b) The Borrower shall submit to the Bank for its review and (approval: (i) promptly after the date hereof, the terms of) reference for the studies included in Part B of the Project; and (ii) by March 31, 1984 (or such other date as the Bank may agree), the terms of reference for the study included in Part C (b) of the Project. (c) The Borrower shall: (i) make available to the consul- tants employed or to be employed pursuant to paragraph (a) hereof all information relevant to Parts A through D of the Project; and - 5 - (ii) ensure that they shall be provided, for the duration of their employment, with suitable facilities, adequate and qualified counterpart personnel and such other appropriate resources as may be necessary for the timely and efficient performance of their services under such Parts of the Project. Section 3.03. (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 indenity 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, required for Parts A through D of the Project and to be financed out of the proceeds of the Loan, to be used exclusively for such Parts of the Project. Section 3.04. The Borrower shall furnish to the Bank, promptly upon their preparation, all the documents prepared by the consultants employed or to be employed pursuant to Section 3.02 (a) of this Agreement, including the plans, designs, speci- fications, reports and drafts thereof, contract documents and work and procurement schedules and estimates of costs for Parts A through D of the Project, and any material modifications thereof or additions thereto, in such numbers and detail as the Bank shall reasonably request. Section 3.05. (a) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of Parts A through D of the Project (including the cost and the benefits to be derived from said Parts of the Project), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in said Parts of the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in Part A of the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning Parts A through D of the Project, their cost and, where appropriate, the benefits to be derived from said Parts of the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. -6- (b) Upon the award by the Borrower of any contract for goods, works or services for Parts A through D of the Project and to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall, with the assistance of the Guarantor pursuant to Section 4.02 of the Guarantee Agreement, prepare and furnish to the Bank, for its review and comments, a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution of the Project and the initial operation of Part A thereof, the cost and the benefits derived and to be derived from the Project, the performance by the Guaran- tor, the Bank and the Borrower of their respective obligations under the Guarantee and Loan Agreements (including the Guarator's obligations under Section 2.02 of the Guarantee Agreement) and the accomplishment of the purposes of the Loan. Section 3.06. The Borrower shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the con- struction (and operation) of the test station included in Part A of the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to such Part of the Project. Section 3.07. The Borrower shall take all action, within its powers, as shall be necessary or useful on its part to assist the Guarantor in fulfilling its obligations under Section 4.03 (a) of the Guarantee Agreement. ARTICLE IV Management and Operations of the Borrower Section 4.01. (a) The Borrower shall at all times conduct its operations under the supervision of qualified and experienced management assisted by qualified and experienced personnel in adequate numbers, within the framework of an appropriate organi- zational structure and according to appropriate procedures. - 7- (b) The Borrower shall: (i) (A) establish and, thereafter, maintain at all times an administrative division and a finan- cial and accounting division; (B) employ at all times senior personnel to head both divisions, such senior personnel to be assisted at all times by such middle level personnel and clerical staff as shall be necessary to enable such divisions to effi- ciently discharge their responsibilities; and (ii) (A) establish and, thereafter, maintain at all times an oil shale division comprising a geology and mining exploration department, a mining department, a pilot plant department, a research and development department and a planning department; and (B) employ at all times: (1) senior personnel to head such division and each of such depart- ments; and (2) a contract management spe- cialist to assist the head of such division in the management of contracts related to oil shale. (c) (i) The Borrower shall carry out and, by June 1, 1983 (or such other date as the Bank may agree), submit to the Bank for its review and comments a study on (1) the measures required to improve the conduct of the Borrower's operations, its organi- zational structure and the procedures governing its activities and (2) its additional staffing require- ments. (ii) In order to assist the Borrower in carrying out such study, the Borrower shall, by September 1, 1982 (or such other date as the Bank may agree), employ management consultants whose qualifications, exper.ience and terms and conditions of employment shall be satisfactory to the Bank; the employment of such consultants shall be made in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of -8- Consultants by World Bank Borrowers and by the World Bank as Executing Agency", published by the Bank in August 1981. (iii) Upon receipt of the Bank's comments on said study, the Borrower shall promptly take all appropriate steps to implement the recommendations emanating from such study, taking into account the Bank's comments. Section 4.02. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. (a) The Borrower shall: (i) at all times manage its affairs and maintain its financial position in accor- dance with appropriate engineering and financial practices and with due regard to health, ecological and environmental factors; and (ii) in particular, adequately maintain all the equipment and assets relevant to, or necessary for, the carrying out of the Project and for the operation of the facilities provided there- under and shall, promptly as required, make all necessary renewals and repairs thereof. (b) Except as the Bank and the Borrower shall otherwise agree, the Borrower shall take all steps necessary to acquire, maintain and renew all licenses, consents or other rights as may be necessary or useful in the conduct of its business. (c) Except as the Bank and the Borrower shall otherwise agree, the Borrower: (i) shall obtain title to all goods, financed in whole or in part out of the proceeds of the Loan, free and clear of all encumbrances; and (ii) shall not sell, lease, transfer or otherwise dispose of any of its property and assets except in the ordinary course of business. Section 4.04. If the Borrower establishes or acquires any subsidiary or other entity, the Borrower shall cause such subsi- diary or entity to observe and perform the obligations of the Borrower hereunder as though such obligations were binding upon such subsidiary or entity. -9- ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain records and accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. (b) Without any limitation upon the generality of the foregoing, the Borrower shall, by June 30, 1982 (or such other date as the Bank may agree), establish and, thereafter, maintain separate records and accounts for Parts A through D of the Project in accordance with procedures acceptable to the Bank. (c) The Borrower shall, promptly after the date hereof, prepare and submit to the Bank: (i) a provisional opening balance sheet, together with an audit report pertaining thereto, of such scope and in such detail as the Bank shall reasonably request, prepared by independent auditors acceptable to the Bank; and (ii) the 1982 budget and the 1982 program related to its technical and financial operations (referred to in Article 4 of the draft Dgcret providing for the administrative structure of ONAREP and furnished to the Bank) approved by the Guarantor. (d) The Borrower shall prepare and, by September 1, 1982 (or such other date as the Bank may otherwise agree), submit to the Bank, its opening balance sheet, together with an audit report pertaining thereto, of such scope and in such detail as the Bank shall reasonably request, prepared by independent auditors accept- able to the Bank. Section 5.02. The Borrower shall: (i) have all its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate 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 six months after the end of each such year (A) certi- fied copies of those 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 its accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. - 10 - 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 satis- factory 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 all action required on its part to obtain in a timely fashion such funds as the Guarantor has undertaken to provide or cause to be provided under the Guarantee Agreement. Section 5.05. Except as the Bank shall otherwise agree: (a) The Borrower shall not repay in advance of maturity any part of its indebtedness other than its Specific Projects Debt. (b) If the Borrower shall repay in advance of maturity any part of its Specific Projects Debt other than the Loan, the Borrower shall simultaneously prepay in the same proportion an amount of the Loan then outstanding, and all the provisions of the General Conditions relating to repayment in advance of maturity shall be applicable to any repayment by the Borrower to the Bank pursuant to this Section. Section 5.06. In the event of liquidation, termination, dissolution or winding up of the Borrower, the principal and other amounts payable on the Specific Projects Debt of the Bor- rower shall first be paid before any payment is made on account of the funds provided to the Borrower by the Guarantor. - 11 - Section 5.07. Unless the Bank shall otherwise agree, the Borrower shall, at all times, maintain sufficient funds to meet all its current liabilities as and when they become due and payable. For the purposes of this Section, the term "current liabili- ties" means accounts payable within 12 months, customer advances, income taxes, dividends, bonuses, and all liabilities (including debt) which could become due and payable or could, under circum- stances then existing, be called for payment pursuant to their terms within 12 months. 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 pursuant to paragraph (k) thereof: (a) The ONAREP Legislation or the Code des Hydrocarbures or the Raglement Minier or any provision thereof, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the operations or the financial condition of the Borrower or its ability to properly carry out Parts A through D of the Project or any of its obligations under the Loan Agreement or to carry on its operations. (b) Prior to the submission to the Bank of the report referred to in Section 3.05 (c) hereof, any action shall have been taken or any arrangement or contract shall have been concluded which (1) interferes with the carrying out of the Project or (2) directly or indirectly restricts or in any way impedes the ability of the Borrower or the Guarantor to apply the conclusions of the Project studies in selecting the most appropriate technical process for the development or the exploitation of oil shale resources through retorting in Morocco. (c) A subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such creation, acquisition or taking over would adversely affect the conduct of the Borrower's business or the Borrower's financial condition or the efficiency of the Borrower's management and personnel or the carrying out of Parts A through D of the Project. - 12 - Section 6.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) The event specified in paragraph (a) or paragraph (b) of Section 6.01 shall occur. (b) The event specified in paragraph (c) of Section 6.01 shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Guarantor and the Borrower shall have made the arrangements referred to in Section 3.01 (c) of this Agreement, as provided therein; (b) the Borrower shall have established the divisions and departments and employed the senior personnel referred to in Section 4.01 (b) of this Agreement, as provided therein; (c) the Bank shall have given its approval of the terms of reference for the studies included in Part B of the Project, pursuant to the provisions of Section 3.02 (b) (i) hereof; (d) the Borrower shall have submitted to the Bank the documents referred to in Section 5.01 (c) here-f, as provided in such Section; and (e) all the mesures r6glementaires referred to in Article 3 of Dahir No. 1-81-345, dated November 10, 1981, shall have been issued, effecting in particular the transfer of all assets and liabilities pertaining to the hydrocarbon and oil shale sector from Bureau de Recherches et Participations Minieres (herein- after called BRPM) to the Borrower and the Dfcret providing for the administrative structure of ONAREP has been issued (sub- stantially as furnished in draft to the Bank). - 13 - Section 7.02. The following is specified as an additional matter, 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, namely, that all the mesures rfgle- mentaires referred to in Section 7.01 (e) hereof shall have been duly issued under the laws of Morocco, effecting in particular the transfer of all the assets and liabilities pertaining to the hydrocarbon and oil shale sector from BRPM to the Borrower and the Dfcret providing for the administrative structure of ONAREP has been duly issued (substantially as furnished in draft to the Bank) under the laws of Morocco. Section 7.03. The date :TA , is hereby specified for the purpose of Section 12.4 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: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: ONAREP 4, Avenue de France Rabat Agdal Morocco Telex: BURPET 317 15 M - 14 - 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 Rabat, Kingdom of Morocco, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Europe, Middle East and North Africa OFFICE NATIONAL DE RECHERCHES ET D'EXPLOITATIONS PETROLIERES By Authorized Representative - 15 - SCHEDULE 1 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) Equipment for 3,200,000 100% of foreign Part A of the expenditures Project (2) Works related to 1,400,000 100% the erection of mechanical equipment for Part A of the Project (3) Consultants' services: (a) for Parts A 9,000,000 ) through D of ) 100% of for- the Project ) eign expendi- ) tures and ) 85% of local (b) for Part E of 200,000 ) expenditures the Project ) (4) Unallocated 6,200,000 TOTAL 20,000,000 - 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 the Guarantor or for goods or services supplied from the territory of the Guarantor. 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 the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank 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. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals 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 $2,000,000 may be made on account of payments made for such expenditures before that date but after March 1, 1981. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 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, by notice to 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 applicable to such expenditures in order that further withdrawals under such Category may continue until all ,xpenditures thereunder shall have been made. - 17 - 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 main objective of the Project is to assist the Guarantor and the Borrower in exploring the viability of the development and exploitation of oil shale resources in Morocco, and in selecting a technical process adequate therefor. The Project consists of the following Parts: Part A: Test Station Construction at Timhadit, and initial operation for 12 months, of a test station consisting of two 80-ton retorts with related equipment, instruments, laboratory and a small open pit mine to be utilized in carrying out the test program (which will include the testing of the process known as T3) to be submitted by the Borrower to the Bank pursuant to Section 3.01 (b) (i) of this Agreement. Part B: Evaluation Study of Retorting Processes Carrying out of a comparative technical evaluation study of retorting processes to determine the main technical charac- teristics and requirements of commercial operations for producing oil from shale in Morocco; and, to that end, provision of about 100 man-months of consultants' services. Part C: Mine and Retorting Plant and Infrastructure Feasibility Studies (a) Carrying out of a mine feasibility study to deter- mine, inter alia, the likely cost of shale to be deliv- ered by the proposed mine; and, to that end, provision of about 170 man-months of consultants' services. (b) On the basis of the studies referred to in Parts B and C (a) of the Project, carrying out of a retorting plant and infrastructure feasibility study to define, in a comprehensive fashion, the parameters for a commercial plant for the production of oil from shale in the Timhadit area; and, to that end, provision of about 140 man-months of consultants' services. .19 Part D: Technical Assistance Furnishing of technical assistance to the Borrower in the field of oil shale development, for the purpose of, inter alia, (1) carrying out the test program to be submitted by the Borrower to the Bank pursuant to Section 3.01 (b) (i) of this Agreement and (2) interpreting the results thereof; and, to that end, provision of about 65 man-months of consultants' services. Part E: Retorting and Direct Combustion of Shale Study Carrying out of a study to compare retorting of the Timhadit area's shale for oil extraction with direct combustion of such shale in power plants in order to determine the impact of each of these two methods of shale exploitation on the reduction of oil imports by the Guarantor and the comparative economic cost asso- ciated with such reduction of : 'l imports; and, to that end, provision of about 15 man-months of consultants' services. T P * The Project is expected to be completed by March 31, 1986. - 20 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (exressed in dollars)* On each June 15 and December 15 beginning December 15, 1986 through December 15, 1998 770,000 On June 15, 1999 750,OOO * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 21 - 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 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 2.05% More than three years but not more than six years before maturity 4.10% More than six years but not more than eleven years before maturity 7.50% More than eleven years but not more than fifteen years before maturity 10.25% More than fifteen years before maturity 11.60% - 22 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, works for the erection of mechanical equipment included in Part A of the Project and equipment for such Part of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender dociments relating thereto, a general procure- ment notice, in such form and detail and containing such informa- tion as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of inter- national competitive bidding. 3. The works for the erection of mechanical equipment included Part A of the Project shall be procured under a single responsi- bility contract. B. Other Procurement Procedures 1. Contracts for the procurement of equipment for Part A of the Project, whose inuividual cost is estimated at the equivalent of less than $300,000 but more than $10,000, may be awarded through limited international tendering after obtaining quotations from at least five suppliers in at least three different countries which shall be member countries of the Bank or Switzerland*; such * For the purposes of this paragraph, suppliers in Taiwan are eligible to compete in providing the equipment to be procured. - 23 - limited international tendering shall be carried out in accordance with procedures consistent with those set forth in Part A of the Guidelines except that no notification or advertisement of the invitation to bid will be required and no margin of domestic or regional preferences for manufacturers will be applicable. 2. Contracts for the procurement of equipment for Part A of the Project, whose individual cost is estimated at the equivalent of $10,000, or less may be awarded after obtaining quotations from a least three suppliers. C. Review of Invitations to Bid and of Proposed Awards and Final Contracts: 1. With respect to all contracts estimated to cost the equiva- lent of $300,000 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) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract 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) (i) of this Agreement, on the evaluation and com- parison of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it deter- mines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the sub- mission ts the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. -24 - 2. With respect to each contract 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 the respective bids, or price quotations, as the case may be, 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. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of tht Bank thereunto this iT day of L , 198 L. FOR SECRETARY