Conformed Copy - L2912 - Cocoa Rehabilitation Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2912 CM Loan Agreement (Cocoa Rehabilitation Project) between REPUBLIC OF CAMEROON and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated April 21, 1988 LOAN NUMBER 2912 CM LOAN AGREEMENT AGREEMENT, dated April 21, 1988, between REPUBLIC OF CAMEROON (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received a letter, dated October 26, 1987, from the Borrower stating its policies in the cocoa sector and declaring the Borrower's commitment to the execution of policy reforms (the Program of policy reforms) aiming at increased production incentives, more efficient marketing systems and improved support services for the delivery of technical advice and inputs; (B) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (C) Part A of the Project will be carried out by Societe de Developpement du Cacao (SODECAO) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to SODECAO part of the proceeds of the Loan as provided in this Agreement; (D) in order to assist in financing part of the Project, the Borrower intends to contract from Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH (GTZ) a grant (the GTZ Grant) in an approximate amount equivalent to three million dollars ($3,000,000), on terms and conditions set forth in an agreement (the GTZ Grant Agreement) to be entered into between the Borrower and GTZ; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Bank and Page 2 SODECAO; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. 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) "Project Agreement" means the agreement between the Bank and SODECAO of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Financing Agreement" means the agreement to be entered into between the Borrower and SODECAO pursuant to Section 3.01 (e) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Financing Agreement; (c) "CENADEC Agreement" means the agreement to be entered into between the Borrower and CENADEC pursuant to Section 3.01 (d) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the CENADEC Agreement; (d) "FONADER Agreement" means the agreement to be entered into among the Borrower, FONADER and SODECAO pursuant to Section 3.01 (e) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the FONADER Agreement; (e) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (f) "MINAGRI" means the Borrower's ministry responsible for agriculture; (g) "DEP" means the Direction des Etudes et Projets of MINAGRI; (h) "COOP/MUT" means the Direction de la Cooperation et de la Mutualite of MINAGRI; (i) "MINCI" means the Borrower's ministry responsible for commerce and industry; (j) "IRA" means Institut de la Recherche Agronomique, a research institute of the Borrower's ministry responsible for higher education and scientific research; (k) "SODECAO" means Societe de Developpement du Cacao, a Societe de Developpement of the Borrower, established and operating pursuant to Law No. 68/LF/9 dated June 11, 1968, Decree No. 80/080 dated March 10, 1980 and Decree No. 84/78 dated March 19, 1984, as the same may be amended from time to time; (l) "CENADEC" means Centre National de Developpement des Entreprises Cooperatives, an Etablissement Public of the Borrower, operating pursuant to Decree No. 75/682 dated October 25, 1975, as the same may be amended from time to time; (m) "ONCPB" means Office National de Commercialisation des Produits de Base, the Borrower's National Produce Marketing Board, established and operating pursuant to Law No. 76/20 dated September 9, 1976 and Decree No. 78/054 dated February 23, 1978; (n) "SOCOODER" means a Societe Cooperative de Developpement Rural, established and operating in accordance with the Borrower's Law No. 73/15 of December Page 3 7, 1973 and Decree No. 74/874 of October 29, 1974 and its statutes, or any successor thereto; (o) "FONADER" means the Fonds National de Developpement Rural of the Borrower, established and operating pursuant to the Borrower's Ordinance No. 73/24, dated May 29, 1973, as amended by the Borrower's Law No. 77/05, dated July 13, 1977, and the Borrower's Decree No. 73/496, dated August 28, 1973, as such Ordinance, Law and Decree may be amended from time to time; (p) "SODECAO's Area of Operation" means the Borrower's Center and South Provinces and the Sanaga Maritime Department in the Littoral Province; (q) "Project Accounts" means the SODECAO Project Account and the CENADEC Project Account referred to in Section 3.02 of this Agreement; (r) "CFA francs" and the letters "CFAF" mean the Franc de la Communaute Financiere Africaine, the currency of the Borrower; and (s) "Subsidiary Financing" means a loan made or proposed to be made by FONADER, out of the Borrower's contribution and out of the proceeds of the Loan, for a pilot medium-size plantation in accordance with Section 2.02 (a) (ii) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to one hundred three million dollars ($103,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement: (i) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement (except Part D thereof) and to be financed out of the proceeds of the Loan; and (ii) for amounts disbursed (or, if the Bank shall so agree, for disbursements required to be made) under Subsidiary Financings in respect of the reasonable cost of goods and services required for Part D of the Project and to be financed out of the proceeds of the Loan pursuant to the provisions of Schedules 1 and 6 to this Agreement. (b) The Borrower shall, for the purposes of Part A of the Project, open and maintain in CFAF a special account in a commercial bank on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1994 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. Page 4 (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. 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. (a) The Borrower declares its commitment to the objectives of .he Project as set forth in Schedule 2 to this Agreement and, to this end: (i) shall carry out Part B of the Project through MINAGRI; and (ii) shall cause: (1) CENADEC to carry out Part C of the Project; and (2) FONADER to carry out Part D of the Project with SODECAO's assistance; all with due diligence and efficiency and in conformity with appropriate administrative, agricultural, economic, financial and planning practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause SODECAO to perform in accordance with the provisions of the Project Agreement all the obligations of SODECAO therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable SODECAO to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall enter into a financing agreement with SODECAO, under terms and conditions which shall have been approved by the Bank, for the purpose of making available the proceeds of the Loan to SODECAO, as may be allocated from time to time to Categories (1) through (5) of the table set forth in paragraph 1 of Schedule I to this Agreement. (d) The Borrower shall enter into an agreement with CENADEC (the CENADEC Agreement), under terms and conditions which shall have been approved by the Bank, for the purpose of the execution of Part C of the Project and of making available the proceeds of the Loan to CENADEC, as may be allocated from time to time to Categories (6) through (8) of the table set forth in paragraph 1 of Schedule I to this Agreement. (e) The Borrower shall enter into, and shall cause SODECAO to enter into, an agreement with FONADER (the FONADER Agreement), under terms and conditions which shall have been approved by the Bank, for the purpose of the execution of Part D of the Project and of making available the proceeds of the Loan to FONADER, as may be allocated from time to time to Category (11) of the table set forth in paragraph 1 of Schedule 1 to this Agreement, and in accordance with the policies and procedures set forth in Schedule 6 to this Agreement. (f) The Borrower shall exercise its rights under the Financing Agreement, the Page 5 CENADEC Agreement and the FONADER Agreement, in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Financing Agreement, the CENADEC Agreement, the FONADER Agreement or any provision thereof. Section 3.02. Without any limitation upon any of its obligations under Section 3.01 of this Agreement, the Borrower shall: (a) establish and maintain a Project Account in the name of SODECAO and a Project Account in the name of CENADEC in a commercial bank on terms and conditions satisfactory to the Bank to be used exclusively for the purpose of meeting expenditures not financed out of the proceeds of the Loan, under Parts A and C of the Project, respectively; (b) in addition to the initial amounts referred to in Section 7.01 (a) of this Agreement, deposit into said Project Accounts, promptly before the end of each quarter of its fiscal year, the Borrower's contribution towards expenditures under Parts A and C of the Project, respectively, during such quarter; and (c) take all necessary measures to ensure that, before the end of each quarter of its fiscal year, until the completion of the Project, the aggregate amount available in the SODECAO Project Account shall be not less than one billion nine hundred eighty million CFA francs (CFAF1,980,000,000) and in the CENADEC Project Account not less than sixty million CFA francs (CFAF 60,000,000). Section 3.03. (a) Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. (b) The Borrower shall: (i) ensure that SODECAO shall be directly responsible for the procurement of all crop protection chemicals for its annual programs; and (ii) cause SODECAO, in the carrying out of Part A.4 of the Project, to coordinate and supervise the use of pesticides and fungicides in accordance with environmental guidelines satisfactory to the Bank. Section 3.04. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Part A of the Project shall be carried out by SODECAO pursuant to Section 2.03 of the Project Agreement. Section 3.05. The Borrower shall furnish sufficient cocoa planting materials from its seed farms to SODECAO to enable SODECAO to carry out its annual planting program. Section 3.06. The Borrower shall, not later than March 31 of each year, furnish or cause to be furnished to the Bank for its review proposed annual work programs relating to Part B of the Project and budgets relating thereto and for its approval proposed annual work programs of CENADEC and budgets relating thereto. Section 3.07. The Borrower shall, not later than June 30, 1988, or such other date as the Bank may agree, extend the planting bonus of CFAF 200,000 to all farmers planting or replanting cocoa trees over an area of one hectare or more. Section 3.08. The Borrower shall: (a) ensure that the organization and management study of SODECAO included in Part B.4 of the Project shall be completed not later than September 30, 1988; (b) furnish a copy of said study to the Bank for its review and comments and exchange views with the Bank on the recommendations included therein; and (c) promptly thereafter take all such measures as determined in agreement with the Bank on the basis of said recommendations. ARTICLE IV Page 6 Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account 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 certified copy of 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 said records and accounts, as well as the audit thereof, as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditures submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) The Borrower shall cause CENADEC and FONADER, respectively, to maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations and financial condition of CENADEC and FONADER. (b) The Borrower shall cause CENADEC and FONADER, respectively, to: (i) have their records, 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) certified copies of their 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 Page 7 (iii) furnish to the Bank such other information concerning the records, accounts and financial statements of CENADEC and FONADER, as well as the audit thereof, as the Bank shall from time to time reasonably request. ARTICLE V Other Covenants Section 5.01. The Borrower shall: (a) cause ONCPB to carry out a study on cocoa export marketing strategy in accordance with terms of reference determined in agreement with the Bank and to complete it not later than March 31, 1989; (b) furnish a copy of said study to the Bank for its review and comments and exchange views with the Bank on the recommendations included therein; and (c) promptly thereafter take or cause to be taken all such measures as determined in agreement with the Bank on the basis of said recommendations. Section 5.02. The Borrower shall cause: (a) CENADEC to carry on its operations and conduct its affairs in accordance with sound administrative, financial, economic and agricultural practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; and (b) FONADER to carry on its operations and conduct its affairs in accordance with sound administrative, financial, agricultural credit, commercial and economic practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. ARTICLE VI Remedies of the Bank Section 6.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) SODECAO shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that SODECAO will be able to perform its obligations under the Project Agreement. (c) The Borrower's Law or Decrees referred to in Section 1.02 (k) of this Agreement shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of SODECAO to perform any of its obligations under the Project Agreement or the operations or financial condition of SODECAO. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of SODECAO, CENADEC or FONADER or for the suspension of operations of any of them without prior arrangements satisfactory to the Bank having been made by the Borrower for the transfer to another agency or service of the Borrower of their respective functions with regard to the carrying out of the part of the Project for which they are responsible. (e) Any representation made by SODECAO in or pursuant to the Project Agreement, or any statement furnished in connection therewith, and intended to be relied upon by the Bank in making the Loan, shall have been incorrect in any material respect. (f) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan (including the GTZ Grant) made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in Page 8 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 the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. (g) An event has occurred which shall make it improbable that the Program of policy reforms, or a significant part thereof, will be carried out. Section 6.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 6.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and SODECAO; (b) the events specified in paragraphs (c), (d) and (e) of Section 6.01 of this Agreement shall occur; and (c) the event specified in paragraph (f) (i) (B) of Section 6.01 of this Agreement shall occur, subject to the proviso of paragraph (f) (ii) of that Section. 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) the SODECAO Project Account and the CENADEC Project Account have been opened and the Borrower has deposited therein an amount of one billion nine hundred eighty million CFA francs (CFAF 1,980,000,000) and an amount of sixty million CFA francs (CFAF 60,000,000), respectively; (b) the Financing Agreement has been executed on behalf of the Borrower and SODECAO; (c) the CENADEC Agreement has been executed on behalf of the Borrower and CENADEC; (d) the general director, the deputy general director and the management controller referred to in Section 3.01 (b) of the Project Agreement have assumed their functions; and (e) the GTZ Grant Agreement has been duly signed and conditions precedent to initial disbursements under said Agreement, except for the effectiveness of this Agreement, have been fulfilled. Section 7.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by SODECAO, and is legally binding upon SODECAO in accordance with its terms; Page 9 (b) that the Financing Agreement has been duly authorized or ratified by the Borrower and SODECAO and is legally binding upon the Borrower and SODECAO in accordance with its terms; and (c) that the CENADEC Agreement has been duly authorized or ratified by the Borrower and CENADEC and is legally binding upon the Borrower and CENADEC in accordance with its terms. Section 7.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Representative of the Borrower; Addresses Section 8.01. The Minister of the Borrower responsible for planning and regional development is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Planning and Regional Development Yaounde Republic of Cameroon Cable address: Telex: MINPAT 8203-KN Yaounde With copy to: Ministry of Finance Yaounde Republic of Cameroon Cable address: Telex: MINFI 8260-KN Yaounde 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) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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. REPUBLIC OF CAMEROON Page 10 By /s/ Paul Pondi Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Ismail Serageldin Acting Regional Vice President Africa 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 I. SODECAO Expenditures (1) Vehicles 18,300,000 100% (2) Equipment 7,500,000 100% and mate- rials (3) Consultants' 1,800,000 100% services (4) Training 1,200,000 90% (5) Chemical 49,600,000 90% inputs II. CENADEC Expenditures (6) Vehicles and 800,000 100% equipment (7) Consultants' 1,100,000 100% services (8) Training 500,000 90% III. MINAGRI Expenditures (9) Goods and 300,000 90% services for Part B.1, 2 and 3 of the Project Page 11 (10) Consultants' 500,000 100% services for Part B.4 of the Project IV. Other Expenditures (11) Goods and 11,100,000 65% services financed under Part D of the Project (12) Unallocated 10,300,000 TOTAL 103,000,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures: (i) prior to the date of this Agreement; and (ii) after October 15 of each year, unless: (A) SODECAO's targets for reduction of personnel and operating costs set forth in paragraph 5 (a) of the Schedule to the Project Agreement corresponding to the preceding fiscal year have been met in a manner satisfactory to the Bank; and (B) cocoa producer prices and prices for fungicide treatment corresponding to the following twelve-month period have been determined in a manner satisfactory to the Bank and formally announced; and (b) payments for any Subsidiary Financing under Category (11): (i) unless the Borrower has evidenced to the Bank, and the Bank is satisfied with such evidence, that the entity substituting for FONADER for the carrying out of Part D of the Project with SODECAO's assistance is legally established, has sound financial, technical and operational structures and capabilities and has agreed to and will assume all FONADER's agreements and obligations set forth in this Agreement; (ii) until the Bank has dispatched notice to the Borrower, FONADER and SODECAO that it has received and accepted the evidence that the FONADER Agreement has been executed by the parties thereto and, as part of such evidence, the Bank has been furnished by an opinion(s) satisfactory to the Bank showing that the FONADER Agreement has been duly authorized or ratified by the parties thereto and is legally binding upon its respective parties in accordance with its terms; and (iii) unless the policies and procedures set forth in Schedule 6 to this Agreement have been complied with. SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to help modernize the cocoa industry in the Borrower's territory; (b) to increase foreign exchange revenues by promoting cocoa exports; (c) to increase the income level of smallholders by expanding cocoa production and raising productivity; and (d) to promote the establishment of middle size plantations. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: SODECAO 1. Strengthening of SODECAO's general management through a five-year development program by: (a) increasing the efficiency of its Financial and Administrative Departments and its Management Control Unit; and (b) reorganizing its Monitoring and Evaluation Unit; Page 12 all including the provision of technical assistance and the acquisition of equipment and vehicles therefor. 2. Support to SODECAO's on-going agricultural activities related to its smallholder program in SODECAO Area of Operation consisting of: (a) cocoa planting of about 45,000 ha; (b) further development of immature cocoa plantations of about 17,000 ha; (c) in-filling of about 35,000 ha in young and mature cocoa plantations; (d) Robusta coffee planting of about 1,400 ha and rehabilitation of about 1,200 ha; and (e) food crop cultivation; all including the provision of technical assistance, the construction of storage and office facilities and the acquisition of agricultural inputs, equipment and vehicles therefor. 3. Support to, and progressive reorganization of, SODECAO's extension services, including the provision of technical assistance and the acquisition of equipment and vehicles therefor. 4. Support to SODECAO's pest control services and carrying out of an adaptive research program for pest control, including the provision of technical assistance and the acquisition of chemical inputs, equipment and vehicles therefor. 5. Construction of about 1,350 km of feeder roads and carrying out of a five-year feeder road maintenance program in SODECAO's Area of Operation, including the provision of technical assistance, the construction of warehouses and office facilities and the acquisition of materials, equipment and vehicles therefor. 6. Carrying out of a training program for extension workers and young farmers with an emphasis on women's and management training. Part B: MINAGRI 1. Preparation of a long-term cocoa development strategy (including pricing policies). 2. Strengthening of the monitoring and evaluation unit responsible for the Center, South and Littoral Provinces, within DEP. 3. Development of an appropriate analytical capability within DEP to monitor the impact of cocoa price changes and farmer income. 4. Carrying out of an organization and management study of SODECAO. Part C: Strengthening of Cocoa Marketing Reorganization of the cocoa marketing system to make it more efficient and to strengthen CENADEC, marketing cooperatives and cooperative unions including the provision of technical assistance and training and the construction of storage facilities and the acquisition of vehicles and equipment therefor. Part D: Pilot Medium-size Plantation Program Carrying out of a program for development of medium-size cocoa plantations over about 4,000 ha in accordance with the provisions of Schedule 6 to this Agreement. * * * * * The Project is expected to be completed by June 30, 1994. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in dollars)* On each May 1 and November 1 Page 13 beginning November 1, 1993 through November 1, 2007 3,435,000 On May 1, 2008 3,385,000 _______________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than eleven years before maturity More than eleven years but not 0.80 more than sixteen years before maturity More than sixteen years but not 0.90 more than eighteen years before maturity More than eighteen years before 1.00 Page 14 maturity SCHEDULE 4 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Cameroon may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures Items or groups of items estimated to cost less than the equivalent of $100,000 per contract may be procured under contracts awarded on the basis of competitive bidding, advertised locally in accordance with procedures satisfactory to the Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $150,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist SODECAO, DEP and CENADEC in carrying out the Project, SODECAO, DEP and CENADEC shall employ consultants (including the workshop manager referred to in Section 3.01 (b) of the Project Agreement) whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Page 15 SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (11) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures 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 allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to CFAF 400,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On thebasis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request, for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made directly by the Borrower from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories for the Project, minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories for the Project shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further Page 16 withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account. SCHEDULE 6 Policies and Procedures for the Execution of Part D of the Project Except as the Bank shall otherwise agree, Part D of the Project shall be carried out in accordance with the following operating policies and procedures: 1. Pilot medium-size cocoa plantation development projects (hereinafter called the sub-projects) to be financed by Subsidiary Financings under Part D of the Project shall be for priority investments designed to improve cocoa production in the SODECAO Area of Operation over about 4,000 ha. 2. Sub-projects shall be appraised by DEP with SODECAO's assistance. The appraisal report for each sub-project shall include: (a) the technical feasibility, financial viability, economic justification including land consideration (location, acquisition and compensation) and, where applicable, commercial soundness and availability of markets; (b) an economic rate of return calculation. Only sub-projects with an economic rate of return of at least 15% shall be approved; (c) appropriate consideration to the technical and managerial capability of the individual, group of individuals or entity proposed to carry out the sub-project and the choice of technology, timing, location and justification thereof; and (d) the adequacy of the arrangements for the provision of extension services to farmers and the recovery of service charges. 3. The area covered by any sub-project shall be from 10 to 50 ha for individual plantations, with an estimated cost not to exceed $250,000 equivalent, and up to a maximum of 200 ha for individual plantings grouped into large blocks, with an estimated cost not to exceed $900,000 equivalent. 4. All sub-projects shall be submitted for approval to FONADER's Credit Committee and, when estimated to cost the equivalent of $150,000 or more each, to the Bank. (a) When presenting a Subsidiary Financing, for a sub-project estimated to cost the equivalent of $150,000 or more, to the Bank for approval, FONADER shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the entity to carry out the sub-project and an appraisal thereof, including a descriptio of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the Subsidiary Financing, including the schedule of amortization of the Subsidiary Financing; and (iii) such other information as the Bank shall reasonably request. (b) Each request by FONADER for authorization to make withdrawals from the Page 17 Loan Account in respect of a Subsidiary Financing for a sub-project estimated to cost less than $150,000 equivalent shall contain: (i) a summary description of the subproject and the entity to carry it out, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; and (ii) the terms and conditions of the Subsidiary Financing. (c) Except as the Bank and FONADER shall otherwise agree, applications and requests made pursuant to the provisions of subparagraphs (a) and (b) above shall be presented to the Bank on or before June 30, 1993. 5. (a) The entities selected to carry out the sub-projects shall promptly enter into written arrangements with FONADER and SODECAO, on terms and conditions satisfactory to the Bank, pursuant to which FONADER shall, inter alia, obtain rights adequate to protect the interests of the Bank and FONADER, including the right of FONADER to: (i) require the entity to carry out and operate the sub-project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that: (1) the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery, efficiency and reliability of the goods, availability of maintenance facilities and spare parts therefor and, in the case of services, of their quality and the competence of the parties rendering them; and (2) such goods and services shall be used exclusively in the carrying out of the sub-project; (iii) inspect, by itself or jointly with representatives of the Bank and SODECAO if the Bank and SODECAO shall so request, such goods and the sites, works, plants and construction included in the subproject, the operation thereof, and any relevant records and documents; (iv) obtain all such information as the Bank or FONADER or SODECAO shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the entity carrying out the sub-project, if appropriate, and to the benefits to be derived therefrom; and (v) suspend or terminate the right of the entity carrying out the sub-project to the use of the proceeds of the Loan upon failure by such entity to perform its obligations under its arrangements with FONADER and SODECAO. (b) FONADER shall exercise its rights in relation to each sub-project in such manner as to: (i) protect the interests of the Bank and FONADER; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project.