Togo - Cotton Sector Development Project : Credit 1929 - Project Agreement - Conformed

OFFICIAL DOCU MENTS2 CREDIT NUMBER 1929 TO Project Agreement (Cotton Sector Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE TOGOLAISE DU COTON Dated F/3 , 1989 CREDIT NUMBER 1929 TO PROJECT AGREEMENT AGREEMENT, dated F4ku'asj /3 , 1985, between INTERNATIONAL DEVELOPMENT ASSOCIAfION (the Association) and SOCIETE TOGOLAISE DU COTON (SOTOCO). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Togo (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million nine hundred thousand Special Drawing Rights (SDR 10,900,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SOTOCO agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and SOTOCO, certain part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to SOTOCO partly as a grant and partly on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS SOTOCO, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agree- ment; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. -2- ARTICLE II Execution of the Project Section 2.01. (a) SOTOCO declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Deve- lopment Credit Agreement and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the'Project. (b) SOTOCO shall, for the purposes of the Project, open and maintain in CFAF a special account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 2 to this Agreement. (c) Without any limitation or restriction upon the generality of the provision of paragraph (a) above with regard to the provision of funds, SOTOCO shall open and maintain in CFAF a Project Account in a commercial bank on terms and conditions satisfactory to the Bank. (d) Amounts deposited into the Project Account shall be used only to defray the cost of public service activities carried out by SOTOCO on behalf'of the Borrower. (e) For the purposes of ensuring the continued financing of insecticides purchases, SOTOCO shall: (i) open and maintain an account (the FRI) in a commercial bank on terms and conditions acceptable to the Association; (ii) deposit in said account the proceeds of all insecticides sales made by SOTOCO; and (iii) use the funds deposited in FRI only to finance insecticides purchases. (f) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and SOTOCO shall otherwise agree, SOTOCO shall carry out the Project in accordance with the Implementation Program set forth in Schedule 3 to this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services -3- required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. SOTOCO shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. SOTOCO shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SOTOCO shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provi- sion thereof. Section 2.05. (a) SOTOCO shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement and other matters relating to the purposes of the Credit. (b) SOTOCO shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by SOTOCO of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SOTOCO Section 3.01. SOTOCO shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, and agricultural practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SOTOCO shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and agricultural practices. -4- Section 3.03. SOTOCO shall take out and maintain with respon- sible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. SOTOCO shall, by January 1, 1992, submit to the Association for its approval an action plan for an orderly transfer of public service activities currently carried out by SOTOCO to appropriate departments or agencies of the Borrower. ARTICLE IV Financial Covenants Section 4.01. (a) SOTOCO shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SOTOCO shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) and Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year: (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii). furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. -5- (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, SOTOCO shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such Fiscal Year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) Except as the Association shall otherwise agree, SOTOCO shall maintain a ratio of current assets to current liabilities of not less than 1.8:1. (b) Before October 31, in each of its fiscal years, SOTOGO shall, on the basis of forecasts prepared by SOTOCO and satis- factory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such year and the next following fiscal year and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that SOTOCO would not meet the requirements set forth in paragraph (a) for SOTOCO's fiscal years covered by such review, SOTOCO shall promptly take all necessary - 6 - measures (including, without limitation, adjustments of the structure or levels of its prices) in order to meet such requirements. (d) For the purposes of this Section: (i) The term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, and pre-paid expenses properly chargeable to operating expenses within the next fiscal year. (ii) The term "current liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes, and dividends. (iii) The term "debt service requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the AssociaLion. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. -7- Section 5.02. (a) This Agreement and all obligations of the Association and of SOTOCO thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 10 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SOTOCO of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -8- For SOTOCO: B.P. 219 Atakpame Republic of Togo Cable address: Telex: SOTOCO 5179 Atakpame Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SOTOCO, or by SOTOCO on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by SOTOCO's Director General or such other person or persons as SOTOCO shall designate in writing, and SOTOCO shall furnish to the Association sufficient evidence of the authority and the authenticated specimen.signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. -9- IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By 41 V )C Region1 7ce President Africa SOCIETE TOGOLAISE DU COTON By Rekesentative Authgrized Reffesentative - 10 - SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part B hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Other Procurement Procedures 1. Contracts for goods or services estimated to cost less than $200,000 equivalent may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association, provided that: (i) all bids shall be opened in public and bidders' representatives shall be allowed to be present; (ii) criteria for evaluating bids shall be set out clearly and communicated to all bidders; and (iii) foreign companies shall not be required to be incorporated in Togo in order to participate in the bidding. 2. Items or groups of items estimated to cost less than the equivalent of $100,000 per contract, up to an aggregate amount not to exceed the equivalent of $2,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Works for the maintenance of feeder roads may be carried out by SOTOCO's force account. - 11 - Part C: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the. contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 2 to the Project Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist SOTOCO in carrying out the Project, SOTOCO shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with - 12 - principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 13 - SCHEDULE 2 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accor- dance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of SDR 1,300,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Associa- tion from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall - 14- have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Condi- tions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Associa- tion shall specify by notice to the Borrower. Such further with- drawals shall be made only after and to the extent that the Asso- ciation shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof - 15 - not so eligible or justified. No further deposit by the Associa- tion into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account. - 16 - SCHEDULE 3 Implementation Program SOTOCO shall carry out the Project in accordance with the timetable set out hereunder. 1. Establishment of the mechanism for setting cotton producer prices by December 31, 1988. 2. Announcement of the cotton floor producer price by March 31, 1989. 3. Establishment of FPSF by December 31, 1988. 4. Implementation of measures agreed with the Association to restructure cotton export marketing by December 31, 1988. 5. Study and implementation of a scheme acceptable to the Association by December 31, 1988, for attributing financial incentives to SOTOCO's staff. 6. Reduction of SOTOCO's transport fleet through disposition of 25 trucks by July 31, 1989. 7. Development of a management information system by December 31, 1988, and establishment of said management information system by October 31, 1989. 8. Initiation of study on SOTOCO's cost effectiveness by June 30, 1991, and completion not later than December 31, 1991. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY