Zambia - Eastern Province Agricultural Development : Loan 2001 - Loan Agreement - Conformed

EOFFICIAL DOiCUA LOAN NUMBER 2001 ZA DOCUMNTS Loan Agreement (Eastern Province Agricultural Development Project) between THE REPUBLIC OF ZAMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated 43, 1981 LOAN NUMBER 2001 ZA LOAN AGREEMENT AGREEMENT, dated n A4&044464 44/ , 1981, between THE REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making available the Loan as hereinafter provided; (B) the Borrower has applied to the International Fund for Agricultural Development (hereinafter called the Fund) for a loan (hereinafter called the Fund Loan) in an amount equivalent to nine million Special Drawing Rights (SDR 9,000,000) to assist in financing the Project on the terms and conditions set forth in an agreement (hereinafter called the Fund Loan Agreement) between the Borrower and the Fund; (C) the Fund intends to appoint the Bank as Cooperating Institution to administer the Fund Loan and the Bank has accepted such appointment; (D) by a Project Agreement of even date herewith among the Bank, ECU, LINTCO and ZADB, each of the said parties has agreed to undertake certain obligations in respect of the carrying out of the Project; (E) pursuant to an exchange of letters dated March 3, 1980 and April 3, 1980 between the Borrower and the International Development Association (hereinafter called the Association), the Association has granted to the Borrower a Project Preparation Advance (hereinafter called the Project Preparation Advance) in an amount not exceeding the equivalent of nine hundred and seventy- five thousand dollars ($975,000) to assist in financing the preparation of the Project; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to make the Loan available to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith among the Bank, ECU, LINTCO, and ZADB; NOW THEREFORE the parties hereto hereby agree as follows: -2- 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 Agree- ments of the Bank being hereinafter called the General Condi- tions). 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 forn and the following additional terms have the following meanings: (a) "Fund Loan Account" means the loan account established under the Fund Loan Agreement; (b) "Special Drawing Rights" and "SDR" mean a special drawing right as valued from time to time by the International Monetary Fund; (c) "ECU" means the Eastern Cooperative Union, a cooperative society established pursuant to the Cooperative Societies Act, 1970 (Act No. 63) 1979 and the Cooperative Society Rules of 1972; (d) "LINTCO" means the Lint Company of Zambia, a company established by the Memorandum of Association dated April 1, 1978 under the provisions of the Borrower's Companies Act; (e) "ZADB" means the Zambia Agricultural Development Bank, a statutory body established by the Zambia Agricultural Develop- ment Bank Act No. 18 of 1979; (f) "Project Agreement" means the agreement among the Bank ECU, LINTCO and ZADB, of even date herewith, as the same may be amended from time to time and suich term includes all agreements supplemental to the Project Agreement; (g) "MAWD" means the Ministry of Agriculture and Water Development of the Borrower; 3- (h) "PPS" means the office of the Provincial Permanent Secretary, Eastern Province; (i) "RDSB" means the Rural Development Studies Bureau of the University of Zambia; (j) "Project Advance Account" means the account to be established pursuant to Section 4.05 of this Agreement; (k) "Financing Agreement" means the agreement to be entered into between the Borrower and ECU pursuant to Section 4.02 (a) of this Agreement, as the same may be amended from time to time; and (1) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and LINTCO pursuant to Section 4.02 (b) of this Agreement, as the same may be amended from time to time. 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, a-a amount in various currencies equivalent to eleven million dollars ($11,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Article III of this Agreement. (b) Promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required to repay to itself the amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall be cancelled as of the same date. Section 2.03. The Closing Date shall be June 30, 1987 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. -4- Section 2.04. 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 2.05. The Borrower shall pay interest at the rate of nine and three-fifth per cent (9-3/5%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time., Section 2.06. Interest and other charges shall be payable semiannually on June 15 and December 15 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 Allocation and Withdrawal of Proceeds of Loan and Fund Loan Section 3.01. Subject to the rights of suspension and can- cellation set forth in the Loan Agreement and the Fund Loan Agreement, the amount of the Loan and the amount of the Fund Loan may be withdrawn from the Loan Account and the Fund Loan Account, respectively, in accordance with the provisions of this Agreement and with the allocation of the proceeds of the Loan and the Fund Loan set forth in Schedule 1 to this Agreement, as such allocation may be modified from time to time pursuant to the provisions of such Schedule or by further agreement between the Borrower, the Bank and the Fund. Section 3.02. The Borrower shall be entitled to make with- drawals from the Loan Account and from the Fund Loan Account for expenditures made (or, if the Bank and the Fund shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan and the Fund Loan. Section 3.03. (a) When the Borrower shall desire to withdraw any amount of the Loan or the Fund Loan, the Borrower shall deliver to the Bank a written application in such form and containing such statements and agreements as the Bank or the Fund -5- shall reasonably request. Applications for withdrawal, with the necessary documentation as hereinafter provided shall, except as the Borrower, the Bank and the Fund shall otherwise agree, be made promptly in relation to expenditures for the Project. (b) The Borrower shall furnish to the Bank such documents and other evidence in support of the application as the Bank or the Fund shall reasonably request, whether before or after the Bank shall have approved any withdrawal requested in the applica- tion. (c) Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank or the Fund that the Borrower is entitled to withdraw from the Loan Account or the Fund Loan Account the amount applied for and that such amount is to be used only for the purposes of the Project. Section 3.04. Each such application by the Borrower for withdrawal shall be deemed to be a request to withdraw funds from the Loan Account and from the Fund Loan Account and the funds to be withdrawn pursuant to such application shall be apportioned by the Bank, as nearly as practicable in the circumstances, between the Loan and the Fund Loan in the ratio of 50:50, or such other ratio as shall be agreed between the Bank and the Fund; provided, however, that, if such application shall be made in respect of expenditures that shall be financed out of the proceeds of the Loan or the Fund Loan only, such application shall be deemed to be a request to withdraw funds from the Loan Account or the Fund Account only. Section 3.05. When the Bank shall have approved an applica- tion by the Borrower for withdrawal, the Bank shall: (i) pay the amount, if any, which the Borrower is entitled to withdraw from the Loan Account to or on the order of the Borrower in accordance with the provisions of the Loan Agreement; and (ii) promptly notify the Fund that it has received an application for withdrawal from the Fund Loan Account in the aggregate amount specified in such notice, that it has approved payment of the portion, if any, to be withdrawn from the Loan Account in the amount set forth in such notice, and that the portion to be withdrawn from the Fund Loan Account in the amount set forth in such notice is eligible for payment by the Fund. -6- Section 3.06. If at any time the amount of the Loan or the Fund Loan shall have been fully withdrawn or cancelled, applications by the Borrower for further withdrawals shall be deemed to be requests for withdrawal of the full amount applied for from the Loan Account or the Fund Loan Account only, and the provisions of this Article III except for Section 3.04 hereof shall continue to apply mutatis mutandir until the full amount credited or to be credited to such Account shall have been with- drawn or cancelled. Section 3.07. Upon the Borrower's request and upon such terms as shall be agreed between the Borrower and the Bank, the Bank may, on behalf and for the account of the Fund, enter into special commitments to pay amounts, out of the proceeds of the Fund Loan, to the Borrower or others in respect of the cost of goods required by the Project, subject to the provisions of this Agreement concerning the allocation and apportionment of the proceeds of the Fund Loan. The Fund has advised the Bank that any such special commitment shall, once it has been notified to the Fund, constitute an obligation on the part of the Fund to pay, notwithstanding any subsequent suspension or cancellation of the Fund Loan, the amount to be disbursed out of the proceeds of the Fund Loan in fulfillment of such special commitment. Section 3.08. Except as the Bank and the Fund shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan or the Fund Loan shall be governed by the provisions of Schedule 4 to this Agreement. ARTICLE IV Execution of the Project Section 4.01 (a) The Borrower shall carry out Parts A and B of the Project through MAWD; Parts H and I.1 of the Project through PPS and Part 1.2 of the Project through RDSB, all with due diligence and efficiency and in conformity with appropriate agricultural administrative, financial and engineering 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 ECU, LINTCO and ZADB to perform in accordance with the -7- provisions of the Project Agreement all the obligations therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, licenses, services and other resources, necessary or appropriate to enable ECU, LINTCO and ZADB to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall promptly take all action necessary to permit ZADB and ECU to adjust their interest rate structures to enable ZADB and ECU to comply with their obligations under Sections 4.02 and 4.04, respectively, of the Project Agreement. Section 4.02. Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall: (a) enter into a Financing Agreement with ECU, acceptable to the Bank, providing, inter alia, for: (i) an undertaking by the Borrower to relend to ECU from the proceeds of the Loan up to eight hundred fourteen thousand dollars ($814,000) equivalent, repayable in twenty (20) years, including a five-year grace period, at an interst rate of not less than nine and six-tenths per cent (9.6%) per andum to assist ECU in carrying out Parts C.1 and 0.1 of the Project, and, from the Borrower's own resources, such additional funds as may be required for carrying out the said Parts; and (ii) an undertaking by the Borrower to make available as a grant to ECU, from the proceeds of the Loan up to eigthy-two thousand dollars ($82,000) equivalent, to assist ECU in carrying out Part F of the Project and, from its own resources, such additional grants as may be required, for carrying out the said Part; (b) enter into a Subsidiary Loan Agreement with LINTCO, acceptable to the Bank, in terms of which it will relend to LINTCO, from the proceeds of the Loan, up to one million seven hundred fifty-two thousand dollars ($1,752,000) equivalent, repayable in twenty (20) years including a five-year grace period at an interest rate of not less than nine and six-tenths per cent (9.6%) per annum to assist LINTCO in carrying out Parts C.2, D.2 and G of the Project and, from its own resources, such additional funds as may be required for carrying out the said Parts; (c) make available to ZADB under arrangements and on terms and conditions satisfactory to the Bank, up to one million seven -8- hundred and forty-five thousand dollars ($1,745,000) equivalent to assist ZADB in carrying out Parts E.3 and E.4 and, from its own resources, such additional funds as may be required for the carrying out of the said Parts; (d) the Borrower shall exercise its rights under the Financing Agreement and the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower, the Bank and the Fund and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Financing Agreement or the Subsidiary Loan Agreement or any provision thereof; and (e) the Borrower shall exercise its rights under the arrange- ments with ZADB in such a manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the agreement containing such arrangements or any provision thereof. Section 4.03 The Borrower shall employ or cause to be employed: (i) not later than December 31, 1981, or such other date as the Borrower and the Bank shall agree, the staff listed in Part I of the Annex to Schedule 2 to this Agreement, all of whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Bank, as well as a Zambian counterpart for each of the staff listed in the said Part I; and (ii) all other staff listed in said Annex. Section 4.04. (a) The Borrower shall assign to PPS, in accordance with its internal regulations and procedures for supervision and control, the responsibility for Project imple- mentaton. To this end, PPS shall: (i) review and consolidate the annual work program and budget for each Part of the Project prepared by the respective executing agencies; (ii) prepare not later than June 30 of each year until the completion of the Project, a proposed consolidated action plan and a budget on a quarterly basis for the carrying out the Project in the following fiscal year; (iii) promptly send a copy of such plan and budget to the Bank for its review. (b) In addition to the aforesaid plan and budget, PPS shall: (i) prepare, on the basis of semi-annual reports for each Part of the Project prepared by the respective executing agencies, a consolidated semi-annual progress report including Project expenditures and disbursements for such period; and (ii) send -9- not later than two months after the end of each such period, a copy of such progress report to the Bank and the Fund. Section 4.05. Without limitation upon its obligations under Section 3.01 of this Agreement the Borrower shall: (i) establish and maintain in the Bank of Zambia, under arrangements satis- factory to the Bank, a Project Advance Account to be used by PPS for the purpose of meeting recurrent expenditures under Parts A, B, H and I of the Project; and (ii) deposit in such Project Advance Account, at the beginning of each quarter, the funds required by PPS for recurrent expenditures under said Parts of the Project during such quarter. Section 4.06. The B,rrower shall not later than January 31, 1982 establish a supervisory and evaluation committee with composition, powers and responsibilities acceptable to the Bank and the Fund. Section 4.07. (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 or the Fund 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 and the Fund shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan and the Fund Loan to be used exclusively for the Project. Section 4.08. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and 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 and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan and the Fund Loan, and to disclose their use in the Project; (ii) shall enable the Bank's and the Fund's accredited - 10 - 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 or she Fund Loan and any relevaut records and documents; and (iii) shall furnish to the Bank and the Fund at regular intervals all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the Fund Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contract for goods 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. (d) 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 prepare and furnish to the Bank and the Fund a report, taking into account the findings of the Project evaluation as referred to in Section 4.06 of this Agree- ment, of such scope and in such detail as the. Bank and the Fund shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower, the Bank and the Fund of their respective obligations under the Loan Agreement and the Fund Loan Agreement and the accomplishment of the purposes of the Loan and the Fund Loan. Section 4.09. The Borrower shall take or cause to be taken 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 carrying out Parts A, C and G 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 the Project. ARTICLE V Other Covenants Section 5.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in - 11 - normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or ex- change stabilization fund, or similar functions, for the Borrower. Section 5.02. The Borrower shall cause PPS: (a) to maintain separate Project accounts adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations, resources and expenditures in respect of the Project; (b) to have the Project accounts, including the certifi- cates of expenditures referred to in Section 5.03 of this Agree- ment, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; - 12 - (c) to 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, including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in Section 5.03 of this Agreement as to whether the proceeds of the Loan or the Fund Loan withdrawn from the Loan Account or the Fund Loan Account on the basis of certifi- cates of expenditure have been used for the purpose for which they were provided; and (d) to furnish to the Bank such other information concerning said accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. To the extent that any withdrawals of the proceeds of the Loan or the Fund Loan are made on the basis of certificates of expenditure, the Borrower shall cause ECU and PPS to retain, until one year after the Closing Date, the underlying documentation on which such certificates were based (bills, receipts, invoices or other such documents) and shall make such documentation available to the Bank and the Fund for its inspection. Section 5.04. The Borrower shall: (i) make annual allo- cations to its recurrent budget for recurrent expenditures in respect of research and extension services in the Eastern Province, in amounts which, in real terms, are not less than the amounts allocated in the 1979 recurrent budget for such services; and (ii) commencing January 1, 1982, gradually transfer from its development budget to its recurrent budget all budgetary alloca- tions necessary to cover operating costs of research, extension services, tsetse control and project management related to Parts A, B, H and I of the Project, so that, at the time of completion of the Project, all allocations for such operating costs will have been transferred to its recurrent budget. Section 5.05. The Borrower undertakes that in order to maintain adequate incentives to increase agricultural production by smallholders, it will: (i) continue to review producer prices on an annual basis, taking into account the cost of production to smallholder producers and the level of border prices for various crops, to determine whether producer incentives are adequate; and (ii) review its agricultural pricing policy with the Bank every two years. - 13 - Section 5.06. The Borrower shall, until completion of the Project, maintain in existence in the Eastern Province the posts of Provincial Agricultural Officer, Provincial Extension Training Officer, Provincial Tsetse Control Officer and Provincial Tsetse Control Biologist and, in case of a vacancy arising in one or several of such posts, promptly fill such vacancy or vacancies with qualified and experienced staff. Section 5.07. The Borrower shall pay ECU an advance service charge before each farming and marketing season sufficient to cover all trading costs that shall be reasonably estimated to be incurred by ECU during such season in connection with the marketing of the agricultural produce and the distribution of farm inputs in the Borrower's Eastern Province. Said service charge shall be computed in accordance with annual procurement plans and criteria satisfactory to the Borrower, the Bank and ECU. Section 5.08. The Borrower shall review annually, in con- sultation with the Bank, the prices of fertilizer established by the Borrower. 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) ECU, LINTCO or ZADB shall have failed to perform any of its respective obligations under the Project Agreement; (b) an extraordinary situation shall have arisen .which shall make it improbable that ECU, LINTCO or ZADB will be able to perform any of its respective obligations under the Project Agreement; (c) any legal provision governing or applicable to the organization or operations of ECU, LINTCO or ZADB shall have been amended, suspended or abrogated so as to affect materially and adversely the ability of ECU, LINTCO or ZADB to carry out any of their obligations under the Project Agreement or the efficiency of their respective organizations; - 14 - (d) ECU, LINTCO or ZADB shall be unable to pay their debts as they mature or any action or proceeding shall have been taken by ECU, LINTCO or ZADB or by others whereby any of the property of ECU, LINTCO or ZADB shall or may be distributed among its creditors; (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of ECU, LINTCO or ZADB or for the suspension of operations of ECU, LINTCO or ZADB; and (f) (i) subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any Loan (including the Fund Loan) made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity therefor; (ii) subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower 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. 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) 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 (b) or any event specified in paragraphs (c) through (e) or (f) (i) (B) of Section 6.01 of this Agreement shall occur. - 15 - 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 execution and delivery on behalf of the Borrower of the Fund Loan Agreement has been duly authorized or ratified by all necessary governmental action. and all other conditions prece- dent to the effectiveness of the Fund Loan pursuant to the Fund Loan Agreement (other than the effectiveness of this Agreement) have been duly fulfilled and the Fund has appointed the Bank as Cooperating Institution to administer the Fund Loan on terms and conditions acceptable to the Bank; (b) the Financing Agreement .has been executed on behalf of the Borrower and ECU; (c) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and LINTCO; (d) the Borrower shall have appointed the extension manage- ment specialist, the senior planning officer and the senior finance officer referred to in the Annex to Schedule 2; and (e) the Project Advance Account referred to in Section 4.05 of this Agreement has been established and an initial amount has been deposited, sufficient to cover the recurrent expenditures under Parts A, B, H and I of the Project for the first three months of the Project. 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 ECU, LINTCO and ZADB, and is legally binding upon ECU, LINTCO and ZADB in accordance with its terms; (b) that the Financing Agreement has been duly authorized or ratified by the Borrower and ECU and is legally binding upon the Borrower and ECU in accordance with its terms; and - 16 - (c) that the Subsidiary Loan Agreement has been duly author- ized or ratified by the Borrower and LINTCO and is legally binding upon the Borrower and LINTCO in accordance with its terms. Section 7.03. The date e . is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 7.04. If (1) the Fund Loan Agreement shall have come into force and effect and the Loan Agreement shall have failed to come into force and effect by the date specified in Section 7.03 of this Agreement or a later date established by the Bank for the purposes of Section 12.04 of the General Conditions, or (ii) the entire principal amount of the Loan withdrawn from the Loan Account and all charges which shall have accrued on the Loan shall have been paid before the Fund Loan Agreement shall have terminated, then, notwithstanding the provisions of Sections 12.04 and 12.05 of the General Conditions, the Loan Agreement shall be deemed to be, or to remain, in force and effect but only to the extent required for the purpose of implementing the Fund Loan Agreement and of orderly settlement of matters of mutual interest to the parties thereunder, subject to -such modifications of the Loan Agreement as shall be agreed between the Borrower, the Bank and the Fund for such purposes. Section 7.05. If (i) the Fund Loan Agreement shall terminate in accordance with its terms before the Loan Agreement shall have terminated, or (ii) the Bank shall notify the Borrower that its appointment as Cooperating Institution under the Fund Loan Agree- ment has terminated, the provisions of this Agreement shall, to the extent that they relate to the responsibilities of the Bank as the Cooperating Institution, forthwith terminate. ARTICLE VIII Representative of the Borrower; Addresses Section 8.01. The Minister of Finance of the Borrower 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: - 17 - For the Borrower: Minister of Finance Ministry of Finance P.O. Box 50062 Lusaka Zambia Cable address: Telex: MINFIN ZA 42221 Lusaka 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. THE REPUBLIC OF ZAMBIA By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By V ,Regional Vice President Eastern Africa - 18 - 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 and the Fund Loan, the allocation of the amounts of the Loan and the Fund Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of Amount of the the Fund Loan Loan Allocated Allocated (Ex- % of Expen- (Expressed in pressed in SDR ditures to Category Dollar Equivalent) Equivalent) be Financed 1. (a) Vehicle, 2,095,000 2,000,000 100% of spares, foreign ex- and equip- penditures ment and 80% of local ex- penditures (b) Groundnut 75,000 60,000 100% of decorti- foreign ex- cators ditures and 80% of local ex- penditures (2) Civil works: 2,140,000 1,860,000 95% houses, wells irrigation sys- tems, stores, packing plant and ginnery improvements (3) Technical assis- 100% tance, consul- tancy services and study tours: (a). Part E.3 1,445,000 of the Project - 19 - Amount of Amount of the the Fund Loan Loan Allocated Allocated (Ex- % of Expen- (Expressed in pressed in SDR ditures to Category Dollar Equivalent) Equivalent) be Financed (b) Part E.1 - 445,000 of the Project (c) Parts A, B, 2,100,000 2,100,000 G, and I of the Project (4) (a) Provision - 775,000 100% of credit under Part E.2 of the Project (b) Provision 300,000 - 100% of credit under Part E.4 of the Project (5) Tsetse control, 200,000 165,000 100% of sprayers and foreign ex- chemicals penditures and 80% of local ex- penditures (6) Salaries and 1,245,000 1,020,000 100% of lo- wages under *cal expen- Parts A, B, ditures up H and I to an ag- gregate disbursed amount of $1,000,000; thereafter 90% of lo- cal expen- ditures up - 20 - Amount of Amount of the the Fund Loan Loan Allocated Allocated (Ex- % of Expen- (Expressed in pressed in SDR ditures to Category Dollar Equivalent) Equivalent) be Financed to an ag- gregate disbursed amount of $1,500,000; thereafter 70% of lo- cal expen- ditures up to an ag- gregate disbursed amount of $1,900,000; therafter 30% of lo- cal expen- ditures (7) Refunding of 975,000 the Project Preparation Advance (8) Unallocated 425,000 575,000 TOTAL 11,000,000 9,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. - 21 - 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect oft (a) payments made for expenditures prior to the date of this Agreement or the date of the Fund Loan Agreement, whichever shall be later; (b) payments made for expenditures under Category (1) (b) of the table in paragraph 1 of this Schedule until the Bor- rower shall have furnished proposals, satisfactory to the Bank, in respect of the type of groundnut decorticators to be purchased; and (c) payments made by ZADB for expenditures under Category (4) (b) of the table in paragraph 1 of this Schedule until ZADB shall have furnished to the Bank the financing plan specified in Section 4.02 (a) of the Project Agreement. 4. Disbursement under Category (4) of the table shown in paragraph 1 of this Schedule shall be made on the basis of cert- ificates of expenditure, signed by the General Manager of ECU and ZADB, respectively. 5. Disbursement under Category (6) of the table shown in paragraph 1 of this Schedule shall be made on the basis of cert- ificates of expenditure, signed by the Provincial Permanent Secretary, Eastern Province. 6. The disbursement percentages have been calculated in com- pliance with the policy of the Bank and the Fund that no proceeds of the Loan and the Fund Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procure- ment or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan or the Fund 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 and the Fund. 7. Notwithstanding the allocation of an amount of the Loan or the Fund loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated - 22 - that the amount of the Loan or the Fund 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 or the Fund Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, provided, however, that no such reallocation of proceeds of the Fund Loan shall be made to Categories 3 (a) and 4 (b); and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expen- ditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 8. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the Loan and the Fund 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 or of the Fund Loan under the Fund Loan Agreement, by notice to the Borrower, cancel such amount of the Loan and/or the Fund 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 and/or the Fund Loan. - 23 - SCHEDULE 2 Description of the Project The major objectives of the Project are to increase the agricultural production and improve the standard of living of smallholders in the Eastern Province of the Republic of Zambia through the provision of improved agricultural services. The Project consists of the following Parts: Part A: Agricultural Research: 1. Strengthening and expansion of the Msekera and Masumba research stations through provision' of housing, equipment and employment of the staff listed in the Annex to this Schedule. 2. Strengthening of the Mount Makulu research station through provision of equipment and establish- ment of an irrigated isolation field. Part B: Provincial Extension Service: Reorganization of the Provincial extension service to introduce a "training and visit" system, including employment of the staff listed in the Annex to this Schedule and provision of housing, equipment, training courses and study-tours. Part C: Expansion of Storage Capacity: Increasing of the storage capacity for agricultural inputs in the Eastern Province through: 1. the construction and expansion of about 63 medium to large stores for ECU; and 2. the construction and expansion of about 36 small stores for LINTCO. Part D: Agricultural Inputs: 1. Provision of additional agricultural inputs, including fertilizer, seed and pesticides for distribution to smallholders by ECU. - 24 - 2. Provision of additional agricultural inputs, including fertilizer, cotton seed and cotton pesticides for distribution to smallholders by LINTCO. Part E: Agricultural Credit: 1. Strengthening of ECU's credit operations through the employment of the staff listed in the Annex to this Schedule. 2. Provision of credit by ECU to smallholders for the financing of agricultural inputs. 3. Strengthening of ZADB's credit operations nation- wide through employment of the staff listed in the Annex to this Schedule. 4. Provision of credit by ZADB to smallholders for the financing of agricultural inputs. Part F: Groundnut Decorticators Expansion of groundnut production through the provision by ECU of groundnut decorticators at about 50 selected markets in the Easten Pro.iLcs. Part G: LINTCO: 1. Expansion of the LINTCO-owned cotton ginnery located in Chipata through the construction of about 1,700 m2 of additional storage capacity. 2. Construction of an insecticide packing plant for LINTCO. Part H: Tsetse Control: Clearing of an area of about 1700 km2 in the Petauke District of tsetse flies through hand spraying. Part I: Project Planning, Coordination, Monitoring and Evaluation: 1* Strengthening of PPS to enable it to plan, coordi- nate and monitor Project implementation, through the - 25 - employment by MAWD of the staff listed in the Annex to this Schedule and to be seconded to PPS for the purposes of the Project. 2. Evaluation of the Project by RDSB, including the preparation of base line studies, on-going evaluation of Project implementation and a post- Project evaluation, with the assistance of the Research Officer. The Project is expected to be completed by December 31, 1986. - 26 - ANNEX TO SCHEDULE 2 Staffing Requirements I. 2 Agronomists (Part A.1) 1 Plant Pathologist (Part A.1) 1 Pasture Agronomist (Part A.1) 1 Livestock Production Officer (Part A.1) 1 Extension Management Specialist* (Part B) 1 Provincial Farm Management Officer (Part B) 1 Credit Specialist (Part E.1) 1 Agricultural Development Banking Specialist (Part E.3) 1 Program Development Specialist (Part E.3) 1 Personnel Development and Training Specialist (Part E.3) 1 Agricultural Credit Specialist (Part E.3) 1 Senior Planning Officer* (Part I.1) 1 Senior Finance Officer* (Part I.1) 1 Research Officer (Part 1.2) II. 1 Seed Production Officer (Part A.1) 1 Laboratory Technician (Part A.1) 5 Diplomates and 70 certificate holders (Part B) 8 full-time Credit Officers** (Part E.1) 2 Junior Planning Officers (Part I.1) 4 Accounts Assistants (Part I.1) 2 Accounts Clerks (Part I.1) * The appointment of qualified and experienced staff to these posts is a condition of effectiveness as referred to in Section 7.01 of this Agreement. ** At present there are 8 half-time Credit Officers in place. - 27 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 15 and December 15 beginning December 15, 1986 through December 15, 2000 365,000 On June 15, 2001 415,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 28 - 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 1.45% More than three years but not more than six years before maturity 2.90% More than six years but not more than eleven years before maturity 5.30% More than eleven years but not more than sixteen years before maturity 7.70% More than sixteen years but not more than eighteen years before maturity 8.65% More than eighteen years before maturity 9.60% - 29 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in 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 to be procured on the basis of international 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 documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information 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 oppor- tunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of inter- national competitive bidding. 3. Contracts for vehicles, spare parts and equipment shall be grouped to the extent practicable to form appropriate bid packages. Bidders will be given the option of bidding for each bid package separately or for a combination of several bid packages and be required to maintain in Zambia adequate after- sales and spare parts inventories. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or - 30 - delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in the Republic of Zambia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. 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. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in the Republic of 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 Republic of Zambia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eva- luated bids 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. 4. If, as a result of the comparison under paragraph 3 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 - 31 - 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 selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Construction of houses, stores, the packing plant and 'the ginnery improvements shall be procured under contracts awarded on the basis of competitive bidding advertised locally and in accordance with local procedures, acceptable to the Bank, which provide that companies registered in any member country of the Bank, Switzerland and Taiwan are entitled to bid. - 2. The rehabilitation of housing for extension workers may be carried out under contracts awarded on the basis of com- petitive bidding advertised locally and in accordance with local procedures acceptable to the Bank. 3. The construction of wells and the rehabilitation of housing for extension workers, where the procedures referred to in para- graph 2 above are not practicable, may be carried out by force account by MAWD, in accordance with procedures satisfactory to the Bank. 4. Contracts for the purchase of vehicles and equipment esti- mated to cost less than $100,000 equivalent each and seeds may be procured in accordance with the applicable procedures of the Borrower; provided, however, that the price of vehicle and equip- ment contracts so procured shall, in the aggregate, not exceed $480,000 equivalent. 5. Incremental requirements for fertilizer and pesticides to be procured through ECU and cotton insecticides and sprayers to be procured through LINTCO shall be (i) grouped with the overall national requirements for such items, and (ii) procured under normal government procedures, acceptable to the Bank, which include broad international tendering. - 32 - E. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for vehicles, spares, equip- ment, fertilizer and pesticides, and insecticides and sprayers estimated to cost the equivalent of $100,000 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 on the evaluation and comparison of the bids received, 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. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the sub- mission 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 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, recommendations for award and such other information as the - 33 - Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guide- lines 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 exten- sion 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 the Bank thereunto this 21 day of , 198 . FOR SECRETARY