Page 1 Legal Department CONFIDENTIAL DRAFT (Subject to Change) KNordlander March 22, 2004 LOAN NUMBER ______-IND Loan Agreement (Coral Reef Rehabilitation and Management Project – Phase II) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 2004 Page 2 LOAN NUMBER ______ -IND LOAN AGREEMENT AGREEMENT, dated , 2004, between REPUBLIC OF INDONESIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received a letter from the Borrower, dated November 11, 1997, and January 21, 1998, describing a program designed to protect, rehabilitate and achieve sustainable use of coral reefs and associated ecosystems (COREMAP) and declaring the Borrower’s commitment to the execution of such Program; (B) the Borrower has requested that the Bank support the Borrower’s execution of COREMAP through a series of credits over a period of approximately 17 years to be utilized by the Borrower in the implementation of COREMAP; (C) the Borrower has also requested that the International Development Association (the Association) support the Borrower’s execution of COREMAP through a series of credits over a period of approximately 17 years to be utilized by the Borrower in the implementation of COREMAP and by an agreement of even date herewith between the Borrower and the Association (the Development Credit Agreement), the Bank is making a credit to the Borrower in the amount in various currencies equivalent to _______________________ Special Drawing Rights (SDR _________) (the Credit); (D) the Borrower has also requested assistance from the resources of the Global Environment Facility Trust Fund for funding Part B.1, Part B.2 (e), Part B.4 (b), and Part B.5 (a) and (c) of the Project and, said request having been approved in accordance with the provisions of the Instrument for the Establishment of the Restructured Global Environment Facility approved under Resolution 94-2, and to be funded from contributions to the Global Environment Facility Trust Fund under Resolution No. 2002-0005, which may include funds carried over from the second replenishment of the Global Environment Facility Trust Fund under Resolution No. 98-2, the Bank acting as an implementing agency of the Global Environment Facility has agreed to extend a grant (the Grant) to the Borrower in an amount equivalent to seven million five hundred thousand Dollars ($7,500,000) on the terms and conditions set forth in the Global Environment Facility Grant Agreement between the Borrower and the Bank (the GEF Grant Agreement); and (E) the Borrower, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to the Development Credit Agreement between the Page 3 - 2 - Borrower and the International Development Association (the Association) of even date herewith (the Development Credit Agreement) (the Project), has requested the Bank to assist in the financing of the Project; and (F) the Borrower and the Bank intend, to the extent practicable, that the proceeds of the credit provided for in the Development Credit Agreement be disbursed on account of expenditures in respect of the Project before disbursements of the proceeds of the loan provided for in Article II of this Agreement (the Loan) are made; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: Page 4 - 3 - ARTICLE I General Conditions; Definitions Section 1.01. The “General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans” of the Bank, dated May 30, 1995 (as amended through October 6, 1999) (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the term “Development Credit Agreement” means the agreement of even date herewith between the Borrower and the Association for the Project, as such agreement may be amended from time to time; and such term includes all schedules and agreements supplemental to the Development Credit Agreement. Page 5 - 4 - ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount equal to thirty three million two hundred thousand Dollars ($33,200,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to the Development Credit Agreement for: (i) expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project Parts B.1 (e) and B.3 (c), (f), and (h) described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan; and (ii) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of District Grants and Village Grants made under Parts B.1 (e) and B.3 (c), (f), and (h) of the Project and in respect of which the withdrawal from the Loan Account is and in respect of the fee referred to in Section 2.04 of this Agreement. Section 2.03. The Closing Date shall be December 31, 2009, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a front-end fee in an amount equal to one percent (1%) of the amount of the Loan. On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of such fee. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to LIBOR Base Rate plus LIBOR Total Spread. (b) For the purposes of this Section: (i) “Interest Period” means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date. Page 6 - 5 - (ii) “Interest Payment Date” means any date specified in Section 2.07 of this Agreement. (iii) “LIBOR Base Rate” means, for each Interest Period, the London interbank offered rate for six-month deposits in Dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (iv) “LIBOR Total Spread” means, for each Interest Period: (A) three-fourths of one percent (3/4 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank’s outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum. (c) The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR Total Spread for each Interest Period, promptly upon the determination thereof. (d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.06, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months’ notice to the Borrower of the new basis. The new basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan. Section 2.07. Interest and other charges shall be payable semi-annually in arrears on _____ 15 and ________ 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in the Schedule to this Agreement. Page 7 - 6 - ARTICLE III Execution of the Project Section 3.01. Subject to Section 3.02 of this Agreement, Sections 2.02 (b), 3.01, 3.02, 3.03, 4.01 and 4.02 of the Development Credit Agreement and Schedules 1 through 5 thereto are incorporated in this Agreement, with the following modifications in said Sections and Schedules 2, 3, 4, and 5, unless the context otherwise requires: (a) the term “Association” shall be read as “Bank”; (b) the term “Credit” and “Credit Account” shall be read as “Loan” and “Loan Account”; and (c) the term “this Agreement” shall be read as “the Loan Agreement”. Section 3.02. So long as any part of the Credit provided for under the Development Credit Agreement shall remain outstanding and unless the Borrower has been notified otherwise by the Bank: (a) all actions taken, including approvals given, by the Association pursuant to any of the Sections of, and Schedules to, the Development Credit Agreement enumerated in Section 3.01 of this Agreement, as well as pursuant to Section 2.02 (a) of the Development Credit Agreement, shall be deemed to be taken or given in the name and on behalf of both the Association and the Bank; and (b) all information or documentation furnished by the Borrower to the Association pursuant to the provisions of any of such Sections of the Development Credit Agreement or Schedules thereto shall be deemed to be furnished to both the Association and Bank. Page 8 - 7 - ARTICLE IV Effective Date; Termination Section 4.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions, namely, that the Development Credit Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Borrower to make withdrawals there under, except only the effectiveness of this Agreement, have been fulfilled. Section 4.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Page 9 - 8 - ARTICLE V Representative of the Borrower; Addresses Section 5.01. 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 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance c/o Directorate General of Budget Jalan Lapangan Banteng Timur 2-4 P. O. Box 1139 Jakarta 10710 Indonesia Cable address: Telex: Facsimile: FINMINISTRY 45799 DJMLN-IA (21) 381 2859 Jakarta 44319 DEPKEU-IA 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: Facsimile: INTBAFRAD 248423 (MCI) or (202) 477-6391 Washington, D.C. 64145 (MCI) Page 10 - 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 Jakarta, Republic of Indonesia, as of the day and year first above written. REPUBLIC OF INDONESIA By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Authorized Representative Page 11 - 10 - SCHEDULE Amortization Schedule