Dominican Republic - Sugar Rehabilitation Project : Loan 1760 - Loan Agreement - Conformed

C ]g LOAN NUMBER 1760 DO Loan Agreement (Sugar Rehabilitation Project) between INTMERNTIONAL BANK TOR RECONSTRUCTION AND DEVELOPMENT and CONSEJO ESTATAL DEL AZUCAR Dated , 1979 /I LOAN NUMBER 1760 DO LOAN AGREEMENT AGREEMENT, dated , 1979, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and CONSEJO ESTATAL DEL AZUCAR (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement; and (B) the Borrower intends to contract from a commercial bank or banks a loan in an amount equivalent to ninety million dollars ($90,000,000) (hereinafter called the Private Bank Loan) to assist in financing: (i) part of the Project, in an amount equivalent to not less than twenty million dollars ($20,000,000); and (ii) current operations and capital expenditures (other than the Project) of the Borrower, in the remaining amount, on the terms and conditions set forth in an agreement (hereinafter called the Private Bank Loai Agreement) to be entered into between the Borrower and such commercial bank or banks; WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "CEA Law" means the Guarantor's Law No. 7 published in the Guarantor's Gaceta Oficial, dated August 20, 1966, which establishes the Borrower; (b) "Ozama" means an Ingenio Azucarero of about 8,000 hectares located in the vicinity and east of the towns of La Bomba and La Victoria; "Rio Haina" means an Ingenio Azucarero of about 38,000 located in the vicinity of the town of Haina; "Boca Chica" means an Ingenio Azucarero of about 8,000 hectares located in the vicinity of the town of Boca Chica; "Consuelo" means an Ingenio Azucarero of about 12,000 hectares located in the, vicinity of the town of Mata Palacio; "Quisqueya" means an Ingenio Azucarero of about 8,000 hectares located in the vicinity of the town of Los Llanos; and "Barahona" means ,an Ingenio Azucarero of about 12,000 hectares located in the vicinity of the towns of Barahona and Vicente Noble; and such Ingenios Azucareros are hereinafter collectively called "the Project Estates"; (c) "Ingenio Azucarero" means a sugar mill owned by the Guarantor and administered by the Borrower in accordance with the CEA Law; and the term includes the land, plantations, factories, cattle, railroad, equipment and other assets used in its oper- ation; (d) "Payment Date" means any of the dates referred to in Section 2.07 of this Agreement in which the Borrower has to make payments to the Bank on account of principal of, or interest and other charges on, the Loan; (e) "Outgrower" means any individual or group of individuals associated in accordance with the laws of the Guarantor, who is not an Ingenio Azucarero and has entered with the Borrower into a contract for the supply of sugarcane to an Ingenio Azucarero; (f) "peso" means the currency unit of the Guarantor; and (g) "Fiscal Year" means the Borrower's fiscal year which starts on October 1 and ends on September 30 of the following calendar year. 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 -3- to, an amount in various currencies equivalent to thirty-f *ve million dollars ($35,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the rp sonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1985 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of seven and nine-tenths per cent (7.9%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE I7I Execution of the Project Section 3.01. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate agricultural, engineering and administrative practices. -4- Section 3.02. In order to assist the Borrower in the carrying out of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, as follows: (a) with respect to Part A of the Project, engineering consultants who shall prepare specifications for the equipment to be acquired thereunder and supervise the installation of equipment for Ozama and the works related thereto; (b) with respect to Part B of the Project and not later than January 31, 1980, railway consultants who shall prepare specifications for purposes of Part B.1, Part B.2, Part B.3 and Part B.4 and supervise the execution thereof, advise on main- tenance of cane hauling rail cars and locomotives and organize the rail traffic on each of the Project Estates; (c) with respect to Parts C.2, C.3, C.4, D.l, D.2, D.3, E and G of the Project, as and when needed for purposes thereof, experts and consultants in the relevant fields thereto; and (d) with respect to Part F of the Project, when required by the Borrower to comply with its obligations under Section 3.04 of this Agreement, chemical consultants and laboratory experts. Section 3.03. (a) The Borrower shall, for purposes of Part D.3 of the Project, take all such action, satisfactory to the Bank, as shall be necessary to reorganize the activities of the experimental station included in such Part of the Project and to ensure that such reorganization is carried out by January 31, 1981. (b) Promptly after such date, the Borrower shall furnish to the Bank a statement of the action taken pursuant to (a) above, the results achieved thereunder and the recommendation of further action that may be taken for purposes of Part D.3 of the Project, including the justification for any purchase of equipment or vehicles that may be recommended in such statement for financing under the Loan. (c) The Borrower shall not make any purchase pursuant to paragraph (b) hereof unless the Bank has expressed its approval thereon. 4~ 5- Section 3.04. (a) The Borrower shall take, for purposes of Part F of the Project, all such action as shall be necessary to ensure that payments to Outgrowers for cane supplied to Ingenio Azucarero Monte Llano by such Outgrowers in respect of the 1980/1 grinding season shall be made on the basis of the sucrose content of such cane. (b) The program under Part F of the Project shall be carried out during the grinding season 1980/1 and during the carrying out of such program the Borrower shall take all such additional steps, in consultation with the Bank, as shall be necessary to ensure that the completion of the program permits the obtainment of sufficient and reliable data for purposes of paragraph (c) below. (c) Promptly upon completion of the program referred to in (b) above but in any event not later than October 31, 1981, the Borrower shall furnish to the Bank a report on the findings of such program and the Borrower's recommendations, based on the experience gained from it, on whether the payment system used under such program, or reasonable variations thereof, may be applied to other Ingenios Azucareros. (d) The Borrower shall afford the Bank a reasonable oppor- tunity to comment on the recommendations of the report referred to in.(c) above before the putting into effect thereof. Section 3.05. The Borrower shall, for purposes of Part G.2 of the Project and not later than December 31, 1980, prepare and furnish to the Bank a report describing a training program for. selected members of the Borrower's staff in the fields of mechani- cal and chemical engineering, both with emphasis on the sugar production industry; such report to include a reasonable timetable for the overall carrying out of the program. Section 3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrowtr to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. -6- Section 3.07. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work 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 (in- cluding 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 to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facili- ties and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any rele- vant records and documents; and (iii) shall furnish to the Bank 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 goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably 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 and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. (d) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents. Section 3.08. The Borrower shall pay to the Guarantor on each Payment Date, starting on the first Payment Date next following the date of the first withdrawal from the Loan Account, a gua- rantee fee at a rate of 2.1% per annum on the unpaid balance of the Loan as of such Payment Date; provided, however, that for purposes of this Section: (i) the Loan shall be deemed denominated and repayable in dollars; (ii) whenever in connection with this Section it shall be necessary to value in terms of dollars any -7- foreign currency payable under the Loan, such valuation shall be made at the prevailing lawful rates of exchange at which such foreign currency and dollars were, at the time of withdrawal of such currency from the Loan Account, obtainable by the Borrower; and (iii) each of the payments of the guarantee fee provided for under this Section which has become due before the first Payment Date set forth in Schedule 3 to this Agreement shall be deferred until such first Payment Date and such payment shall bear interest at a rate of 10% per annum on the outstanding balance thereof. Section 3.09. The Borrower shall take and cause to be taken all action as shall be required to ensure that the execution of the Project is carried out in conformity with appropriate pollution control and ecological standards. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall at all times manage its affairs, maintain its financial position, plan its future expan- sion and carry on its operations in accordance with CEA Law. and with appropriate administrative, business, financial, engi- neering and agricultural practices under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. Section 4.02. (a) The Borrower shall at all times take all steps necessary to maintain its legal existence and right to carry- on operations, including, without limitation, the Project, and shall, except as the Bank shall otherwise agree, take all steps necessary to acquire, maintain and renew such licenses, consents, franchises or other rights as may be necesary or useful for its operations (including the Project). (b) Except as the Bank shall otherwise agree, the Borrower shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking, including the Project. Section 4.03. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, irtsurance against such risks and in such amounts as shall be consistent with appropriate practice. -8- Section 4.04. The Borrower shall, before undertaking to make any appointment to the position of chief of the Borrower's Project and Special Studies Department" afford the Bank a reasonable opportunity to comment on the qualifications and experience of any candidate for such position. Section 4.05. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall: (a) prepare plans, in such detail as the Bank shall reason- ably request, in respect of the three Fiscal Years next following the Fiscal Year in which such plans shall be furnished to the Bank in accordance with paragraph (b) of this Section, for: (i) the maintenance of the facilities, equipment and property in each of the Ingenios Azucareros and in .the Borrower's headquarters, including repairs thereto and renewal thereof; and (ii) the capital expenditures (other than the Project) to be incurred for the modernization and expansion of each of the Ingenios Azucareros; such plans to cover the expenses under (i) and (ii) above and the availability of funds for the purposes; (b) until completion of the Project, furnish to the Bank, not later than three months before the end of each Fiscal Year, each of the plans referred to in paragraph (a) above; (c) afford the Bank a reasonable opportunity to comment on each of the plans to be furnished to.the Bank pursuant to para- graph (b) above or on any modification thereof before putting into effect any such plan or modification; (d) carry out its maintenance operations and capital expend- itures consistently with the plans and modifications thereof furnished to the Bank in accordance with this Section; and (e) upon completion of the Project, continue preparing plans for the purposes set forth in paragraph (a) above in respect of the three Fiscal Years next following the Fiscal Year in which each of such plans is prepared and shall carry out its maintenance operations and capital expenditures consistently with such plans. ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate -9- accounting practices its operations and financial condition and the operations and financial condition of each of the Project Estates. Section 5.02. The Borrower shall: (i) have its accounts (including separate accounts for each of the Project Estates) and financial statements (balance sheets, statements of income and expenses and related statements), including financial statements for each Ingenio Azucarero, for,each Fiscal Year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certi- fied copies of its accounts for such -year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time'reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, *such lien will equally and ratably secure the payment of the principal of, and interest and other chargeg on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satis- factory to the Bank ' to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foreg6ing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. (a) The Borrower shall, when required by the Borrower to comply with the provisions of paragraphs (b) and (c) hereof, carry out a study to determine whether the current -10- interest rate charged on loans made by the Borrower directly or through an Ingenio Azucarero to Outgrowers.for purposes of financ- ing cane planting, cultivation and harvest by the Outgrowers results in financial losses to the Borrower; such study to take into account the timing and amounts of each payment made by the Borrower directly or through an Ingenio Azucarero to the Out- growers on account of sugarcane supplied by the Outgrowers. (b) Promptly upon termination of the study referred to in (a) above, the Borrower shall furnish to the Bank a report with the findings and recommendations of such study and shall afford the Bank a reasonable opportunity to comment thereon before taking any action recommended to be taken by such report. (c) Except as the Bank and the Borrower shall otherwise agree, the Borrower shall take any action recommended by the report referred to in (b) above, by September 30,,1980. Section 5.05. (a) The Borrower shall take all such action as shall be necessary or advisable to: (i) ensure that any payment of principal of, or interest and other charges on, a loan made by the Borrower directly or through an Ingenio Azucarero to an Outgrower, which is overdue as of the date of this Agreement, shall be promptly made by the Outgrower in question; (ii) charge to the Borrower's provision for bad debts any amount under a loan referred to in (a) (i) above which remains overdue by January 31, 1982. (b) The Borrower shall, contemporaneously with the action to be taken by the Borrower for purposes of paragraph (a) (i) above, prepare a plan of such scope and in such detail as the Bank shall reasonably request and furnish such plan to the Bank not later than December 31, 1979. Section 5.06. Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall not incur any debt unless the consolidated net revenues of the Ingenios Azucareros for the Fiscal Year immediately preceding such incurrence or for a later twelve-month period ended -prior to such incurrence, which- ever shall be greater, shall not be less than 2 times the debt service requirements on all debt (including the debt to be incurred) in any succeeding Fiscal Year. For the purposes of this Section: (a) "debt" means any debt incurred by the Borrower, or any advance of monies for the benefit of an Ingenio Azucarero which is repayable by the Borrower or directly by an Ingenio Azucarero, all payable by its terms on demand or maturing more than one year from the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (i) under a ton- tract, loan agreement or other instrument providing for such debt, on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument; and (ii) under a guarantee agreement, or other instrument guaran- teed by the Borrower, on the date the agreement or instrument providing for such guarantee has been entered into or issued, as the case may be, but only to the extent that the guaranteed debt is outstanding; (c) the term "consolidated net revenues of the Ingenios Azucareros" means the gross revenues from sales of sugar and molasses produced by all the Ingenios Anucareros plus payments of interest and other charges on loans made by the Borrower directly or through an Ingenio Azucarero to Outgrowers, less the sum of the operzing and administrative expenses of, plus provision for taxes and interest on short-term debt (maturing less than one year from the date on which it is originally incurred) made by, all the Ingenios Azucareros and the Borrower, but before provision is made for depreciation, interest and other charges on debt; (d) "debt service requirements" means the aggregate amOount of amortization (including sinking fund payments, if any), in- terest and other charges on debt; and (e) whenever in connection with this Section it shall be necessary to value in terms of the currency of the Guarantor debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by the Borrower for the purposes of servicing such debt or, if such foreign currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Bank. Section 5.07. (a) Except as the Bank and the Bor-ower shall otherwise agree, the Borrower shall maintain, and shall cause all the Ingenios Azucareros to maintain jointly, a ratio of current assets to current liabilities of not less than 1.3 to 1, at all times, until the last day of the Fiscal Year ending September 30, 1982 and of not less than 1.5 to 1 at all times thereafter. d I -12- (b) For purposes of this Section: (i) "current assets" includes cash, accounts receivable due within twelve months (other than accounts receivable originating in loans made by the Borrower directly or through an Ingenio Azucarero to Outgrowers), prepaid expenses properly chargeable to operating expenses within the next twelve months following the date on which such prepaid expenses were paid, and sugar and molasses stocks, and excludes inventories and other items which may not, in the ordinary course of business, be converted into cash within twelve months, such as draft animals and materials; and (ii) the term "current liabilitles" means accounts payable within twelve months plus taxes, bonuses and all other liabilities (including debt), all which will become due and payable, or could under circumstances then existing be called for payment within twelve months. Section 5.08. Except as the Bank and the Borrower shall otherwise agree and in order to ensure that the Borrower is able to utilize such internally generated funds as shall be required for purposes of the carrying out of the plans referred to in Section 4.05 of this Agreement and to meet its debt service requirements, the Borrower shall, in accordance with Article 12 of CEA Law and for the aforesaid purposes, allocate to reserves not less than 40 per cent of the Borrower's surplus in each Fiscal Year. 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) any of the measures taken by the Guarantor, or any administrative sub-division thereof, for purposes of Section 7.01 (c) of this Agreement, or the CEA Law, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of the Borrower to carry out its operations, including the Project; and (b) the right "of the Borrower to utilize the Private Bank Loan or any loan made to the Borrower for purposes of the Project shall bave been suspended or cancelled in whole or in part pur- suant to the terms thereof. - 13 - 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) any of the events specified in paragraph (a) of Section 6.01 of this Agreement shall occur; and (b) the Private Bank Loan or any debt for money borrowed by the Borrower for purposes of the Project with an original maturity of one year or more shall have become due and payable before its agreed maturity in accordance with the terms thereof. 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) that the consultants referred to in Section 3.02 (a). of this Agreement have been. hired; (b) that the Private Bank Loan Agreement has been executed and delivered in form and substance satisfaczory to the Bank; and (c) that the Guarantor has taken all appropriate measures- as shall be necessary to eliminate the subsidization of Corpora- ci6n Dominicana de Electricidad and to ensure that the resources so released will not be used to subsidize institutions or activi- ties in any other sector. Section 7.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Private Bank Loan Agree- ment has been duly authorized or ratified by the parties thereto and is valid and binding on such parties in accordance with its terms. Section 7.03. The dat / 9 F6 is hereby speci- fied for the purpose of Se ion 12. 4 of the General Conditions. -14 ARTICLE VIII Addresses Section 8.0l. The folloving addreoses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Recontruction and Development 1818 R Street, N.W. Washington, D.C. 20433 United States of AmerLcá Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Consejo Estatal del Azcar Apartado Postal 1256 y 1258 Santo Domingo, Repåblica Dominicana Cable address: Telex: CEDAZU 3460016 (ITT) or Santo Domingo 4123 (ITT) 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 -15 - of Columbia, United States of America, as of the day and year firet above written, INTERNATIONAL BANK FOR RECONSTRUCTION% AND DEVELOPMENT By 1é&S6dt 2J~ Regional Vice President Latin America and the Caribbean CONSEJO ESTATAL DEL AZUCAR By Authorized Representative 41 1 ;.. -16- BChEDULE Vthdrawal of the Proceeds of the Loan 1. The table belov sete forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the awounts of the Loan to eaach Category and the percentage of expenditures for iteams so to be financed in each Category: Amount of the Loan Allocated Z of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and engi- neering services for Part Å of the Project: (a) equipment 21,790,000 ) ) 100% of fore:gn (b) engineering 930,000 ) expenditures services ) (2) Equipment, materials and technical ser- vices for Part B of the Project: (a) equipment and 1,530,000 ) aterials ) 13% of foreign ) expenditures (b) technical 150,000 ) services ) (3) Consultant service.é for Parts C, D, E, F and G of the Proj- ect and goods for Parts D.2, D.3 and E of the Project and computer leasing for Part G of the Project -17- Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (a) services for Parts 4,380,000 ) C, D, E and F and ) goods for Parts ) D.2, D.3 and E ) 100% of foreign ) expenditures (b) services for Part G 850,000 ) (c) computer leasing 1,870,000 ) (4) Unallocated 3,500,000 TOTAL 35,000,000 2. For the purposes of this Schedule, the term "foreign expen-. ditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied. by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement, except that with- drawals, in an aggregate amount not exceeding the equivalent of $150,000 may be made in respect of Categories 1 and 3 (b) on account of payments made for such expenditures before that date but after June 1, 1979. VAI II -18 - 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such realloca- tion cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. p -19- SCHEDULE 2 Description of the Project The primary objective of the Project is to improve the Borrower's operational efficiency and financial situation by reducing the costs of its sugar production, by preventing break- downs in its sugar manufacturing process and sugarcane transpor- 1 tation system and by strengthening its management methods. The Project consists of: A. Rehabilitation of the factories at the Project Estates Replacement of sugar factory equipment, including the corresponding civil works and engineering services, in factories at Ozama, Boca Chica, Rio Haina, Barahona, Consuelo and Quisqueya, all as more fully detailed in the Annex to this Schedule. B. Rehabilitation of the sugarcane transportation system of the Project Estates 1. Rehabilitation of about 540 kilometers of railway track in Project Estates other than Barahona, including acquisition and utilization of equipment and materials therefor. 2. Acquisition and utilization of three 45-ton diesel- electric locomotives, 2 for Ozama and 1 for Boca Chica,- and of about one hundred fifty 20-ton cane hauling cars for Ozama. 3. Acquisition and utilization of spare parts for 30-inch gauge railroad cars. 4. Construction and equipping of a repair shop for 30-inch gauge railways. 5. Acquisition and utilization of telecommunications equipment for improving efficiency and safety of rail traffic. 6. Acquisition of about twenty 25-ton truck tractors, forty 25-ton cane trailers and five bulldozers and utilization thereof for cane hauling and road maintenance. -20- 7. Construction of a bulk cane yard at Ozama. C. Rehabilitation of Barahona 1. A detailed analysis of about 11,500 hectares of Barahona to determine: (i) the cultivation area required to supply, under efficient sugarcane production methods, the necessary sugarcane to meet the installed capacity of the mill; and (ii) the investments required to retard and to stop soil salinization. 2. Development of about 100 hectares of Barahona, as a pilot scheme, to obtain information on: (i) costs for improving the drainage system and for improving the operation and maintenance thereof; (ii) techniques to improve sugarcane cultivation, including land leveling and appropriate, irrigation methods; and (iii) sugarcane varieties best adapted to the soils of Barahona, and to train the Borrower's personnel in charge of water distribution and irrigation. 3. Supporting studies for 1. above on: (i) updating of working drawings on the Barahona irrigation and drainage networks; (ii) controlled aerial photography; and (iii) soil and land suitability surveys. 4. Supporting studies for 2. above on detailed topography and land leveling of the applicable 100 hectares. D. A program for reduction of cane areas in the Project Estates consisting of: 1. Studies for obtaining basic information for the carrying out of the program, including aerial photography, cadastral survey, soil survey and a transport study. 2. A land suitability survey. 3. Strengthening of agricultural research and extension services provided by the Borrower's Duquesa Experi- mental Station with a view to increasing productivity targets in cane growing, including acquisition and utilization of vehicles and equipment required for the purpose. 217 - 21 - 4. (1) Reduction of the Borrower 's cane areas; (ii) reduction of Outgrowers cane areas, both as target increases in productivity are achieved; and (iii) establishment of a .permanent geographic information system to assist the Borrower in evaluating and Improv- ing management of the resource base. All the aforesaid to be carried on the basis of the carrying out of 1, 2 and 3 above. E. Mechanization progran in Boca Chica A pilot researc, program for mechanization of agricultural and harvesting operations in Boc-a Chica, including acquisition of goods and utilization thereof for purposes of the program. F. Cane grading program in Ingenio Azucarero Monte Llano A pilot program on the feasibility of paying Outgrowers who are supplying cane to the Ingenio Azucarero Monte Llano on the basis of sucrose content of the cane supplied. G. Strengthening of the Borrower's organization and management 1. Acquisition of electronic data processing facilities and utilization thereof for: (i) record keeping control and planning of the Borrower's main administrative tasks; (ii) planning agricultural and manufacturing production; and (iii) transportation scheduling. 2. Development of personnel policies and training programs. 3. Improvement of the Borrower's internal organization. The Project is expected to be completed by December 31, 1984. -22- ANEX TO SCUEDULE 2 List of major Equipeft Itj* for the ahmbilitation under Part A of the Project of Factories at ýthe Project, Estates Oza Killing tandem Turbo-generators "C" crystallizers "A/B" cryotallizers "A/b" centrifugals " entrifugale CUarifier Vacuum pans Juice heaters, scale Seed receivers Calandrias FiLter cake -system Boca Chica. Turbines and mill gearing Turbo-generators Injectión water pumps Rio Haina Turbines and mill gearing Barahona Centrifugals Consuelo Shredder Boiler Quisqueya Boiler ]i -23 - SCHEDULIE 3 ortization Schedule Payment of Principal Date Payment Duc 9expressed in dollars)* On each January 1 and July 1 beginning January 1, 1984 through January 1, 1996 1,345,000 On July 1, 1996 1 375,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 24 Premiums oa Prepayment The following percentages' are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions:c Time of-Prepayment Premium Not more than three years before maturity 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.10% More than eleven years but not more than fifteen years before maturity 6.95% More than fifteen years before maturity 7.90% - 25 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods 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 inter- national competitive bidding as described in Part A of the Guide- lines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, and 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 or prequalification 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 opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update st:h notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Goods for Parts A, B, D.2, D.3 and E of the Project shall be grouped whenever possible, so as to constitute bid packages estimated to cost the equivalent of $50,000 or more each. 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 imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on goods evaluated on a c.i.f. basis, and sales and similar taxes (applicable to finished domestic products) on goods evaluated on an ex-factory basis, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 26 - 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 Dominican Republic 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 Dominican Republic 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 Dominican Republic 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. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated 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 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 -27- 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 fs the lowest evaluated bid shall be selected. C. Other Procurement Procedures Goods for Parts A, B, D.2, D.3 and E of the Project which cannot be grouped to constitute bidding packages estimated to cost the equivalent of $50,000 or more each, may be procured under contracts with reputable suppliers of such goods account being taken of the availability of spare parts thereof and services, if so required; provided, however, that such contracts shall be awarded only after the Borrower has received quotations from not less than three of such suppliers; and further provided, that the aggregate of contracts so awarded shall not exceed the equivalent of $500,000 or more. D. 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 procured under Part A hereof estimated to cost the equivalent of $300,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to * bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Batik, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.02 (a) or (b) of this Agreement, as the case may be, on the evaluation and comparison of the bids received, together -028 - with the recommendations for award of the said consultants and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the delivery 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 delivery 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, recommenda- tions for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Dank, if it determines that the proposal would be inconsistent with the provisions of this Agree ment, shall promptly inform the Borrower and state the reasons for its determination. lo- h 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 day of 197__. FOR SECRETARY 4M