E OFFICIAL LOAN NUMBER 1765 LBR DOCUMENTS j PECIAL ACTION CREDIT NUMBER 35 LBR Project Agreement (Decoris Oil Palm Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY and DECORIS OIL PALM COMPANY Dated ,1979 LOAN NUMBER 1765 LBR SPECIAL ACTION CREDIT NUMBER 35 LBR PROJECT AGREEMENT AGREEMENT, dated _'C Z t - A! , 1979, between INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank), INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMIN- ISTRATOR (and hereinafter called the Administrator) of the Special Account established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY and DECORIS OIL PALM COMPANY (hereinafter called DOPC). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Liberia (hereinafter called the Borrower) and the Bank, the Bank has agreed to lend to the Borrower an amount in various currencies equivalent to twelve million dollars ($12,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that DOPC agrees to undertake such obligations toward the Bank as are hereinafter set forth; (B) by the Special Action Credit Agreement of even date herewith (hereinafter called the Special Action Credit Agreement) between the Borrower and the Administrator, the Administrator has agreed to make to the Borrower a Special Action Credit (herein- after called the Special Action Credit) on the terms and condi- tions set forth in the Special Action Credit Agreement, but only on condition that DOPC agrees to undertake such obligations towards the Administrator as are hereinafter set forth; (C) by a subsidiary financing agreement to be entered into between the Borrower and DOPC, an amount equivalent to seven million seven hundred thousand dollars ($7,700,000) out of the proceeds of the loan provided for under the Loan Agreement; (D) the entire proceeds of the Special Action Credit will be made available by the Borrower to DOPC as equity contribution on the terms and conditions satisfactory to the Bank and the Admini- strator; and (E) WHEREAS DOPC, in consideration of the Bank and the Administrator entering into the Loan Agreement and the Special Action Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. DOPC shall carry out the Project described in Schedule 2 to the Loan Agreement (except Part G and H) with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices. Section 2.02. In order to assist DOPC in carrying out Part F of the Project, DOPC shall employ consultants whose qualifica- tions, experience and terms and conditions of employment (includ- ing terms of reference) shall be satisfactory to the Bank and the Administrator. Section 2.03. (a) DOPC shall enter into an agreement with an international firm acceptable to the Bank and the Administrator providing for the management of DOPC and the training of suitable Liberian employees to assume management and other senior positions of DOPC. The terms and conditions of such an agreement and the qualifications and experience and terms and conditions of employ- ment of the staff provided thereunder shall be satisfactory to the Bank and the Administrator. (b) DOPC shall require employees selected for such training to undertake, after the training, a minimum period of 2 years of service with DOPC. Section 2.04. DOPC shall make necessary arrangements for the provision of all seed requirements for the Project by IRHO or other suitable suppliers. Section 2.05. The criteria for selecting smallholders and the terms and conditions of loans made to smallholders shall be as described in Schedule 2 to this Agreement. The interest rate specified in the said Schedule shall be reviewed annually by DOPC - 3 - in consultation with the Bank with a view to maintaining an adequate rate of interest. Section 2.06. Except as the Bank 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, shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.07. (a) DOPC undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan made available to it by the Borrower against hazards incident to the a:quisition, trans- portation and delivery thereof to the place of use or installa- tion, and for such insurance any indemnity shall be payable in a currency freely usable by DOPC to replace or repair such goods. (b) Except as the Bank and the Administrator may otherwise agree, DOPC shall cause all goods and services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for the Project. Section 2.08. (a) DOPC shall furnish to the Bank and the Administrator, promptly upon their preparation, the plans, speci- fications, reports, contract documents and construction and procurement schedules for its Parts of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank and the Administrator shall reasonably request. (b) DOPC: (i) shall maintain records and procedures adequate to record and monitor the progress of its Parts of the Project (including the cost and the benefits to be derived there- from), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in its Parts of the Project; (ii) shall enable the Bank's and the Administrator's accredited representatives to visit the facilities and construc- tion sites included in its Parts of the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank and the Administrator at regular intervals all such information as the Bank and the Administrator shall reasonably request concerning its Parts of the Project, the cost and, where appropriate, the bene- fits to be derived therefrom, 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 -4- later date as may be agreed for this purpose between DOPC, the Bank and the Administrator, DOPC shall prepare and furnish to the Bank and the Administrator a report, of such scope and in such detail as the Bank and the Administrator shall reasonably request, on the execution and initial operation of its Parts of the Proj- ect, the cost and the benefits derived and to be derived there- from, the performance by DOPC, the Bank and the Administrator of their respective obligations under this Agreement and the accom- plishment of the purposes of the Loan. (d) DOPC shall enable the Bank's and the Administrator's representatives to examine all plants, installations, sites, works, buildings, property and equipment of DOPC and any relevant records and documents. Section 2.09. DOPC shall duly perform all its obligations under the Subsidiary Financing Agreement. Except as the Bank and the Administrator shall otherwise agree, DOPC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subs-diary Financing Agree- ment or any provision thereof. Section 2.10. (a) DOPC shall, at the request of the Bank and the Administrator, exchange views with the Bank and the Adminis- trator with regard to the progress of its Parts of the Project, the performance of its obligations under this Agreement and under the Subsidiary Financing Agreement and other matters relating to the purposes of the Loan. (b) DOPC shall promptly inform the Bank and the Adminis- trator of any condition which interferes or threatens to interfere with the progress of its Parts of the Project, the accomplishment of the purposes of the Loan, or the performance by DOPC of its obligations under this Agreement and under the Subsidiary Financ- ing Agreement. Section 2.11. DOPC shall cause to be adequately maintained in accordance with sound engineering practices all roads on the nucleus estate and all feeder roads on the smallholder plantations and shall provide promptly, as needed, the funds, facilities and services required for the purpose. ARTICLE III Management and Operations of DOPC Section 3.01. DOPC shall at all times carry out its opera- tions, manage its affairs, plan its future expansion and maintain -5- its financial position in accordance with appropriate adminis- trative, financial, engineering and agricultural practices and with experienced and competent management assisted by qualified and competent staff in adequate numbers. Section 3.02. DOPC shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.03. DOPC shall: (a) operate and maintain its plants, equipment and property and from time to time make all necessary renewals and repairs thereof, all in accordance with appropriate engineering and agricultural practices; and (b) take all action necessary to maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business and operations. Section 3.04. DOPC shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient conduct of its business and operations. ARTICLE IV Financial Covenants Section 4.01. DOPC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. DOPC shall also prepare cash flow statements showing operating costs, revenues and capital requirements and monthly statements of estimated expenditures for review by DOPC's Board. Section 4.02. DOPC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank and the Administrator; (ii) furnish to the Bank and the Administrator as soon as avail- able, 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 -6- said auditors, of such scope and in such detail as the Bank and the Administrator shall have reasonably requested; and (iii) furnish to the Bank and the Administrator its annual budget and such other information concerning the accounts and financial statements of DOPC aad the audit thereof as the Bank and the Administrator shall from time to time reasonably request. Section 4.03. Except as shall be otherwise agreed between the Bank, the Administrator and DOPC, DOPC shall not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of DOPC and all its subsidiaries then incurred and outstanding would be greater than one and one-half times the consolidated capital and surplus of DOPC and all its subsidiaries. For the purposes of this Section: (a) "debt" means any debt incurred by DOPC or any subsid- iary maturing more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (i) under a loan contract or agreement on the date such contract or agreement has been entered into; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is out- standing; (c) whenever in connection with this Section it shall be necessary to value in terms of dollars 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 DOPC for the purposes of servicing such debt; (d) "consolidated debt of DOPC and all its subsidiaries" means the total amount of debt of DOPC and its subsidiaries, excluding any debt owed by DOPC to any subsidiary or by any subsidiary to DOPC or to any other subsidiary; and (e) "consolidated capital and surplus of DOPC and its subsidiaries" means the aggregate of the unimpaired paid-up capital, surplus and free reserves of DOPC and its subsidiaries after excluding therefrom such amounts as shall represent equity interests of DOPC in any subsidiary or of any subsidiary in DOPC or any other subsidiary. -7- Section 4.04. DOPC shall declare dividends out of its surplus in amounts and levels acceptable to the Bank, provided, however, that dividends shall not be declared unless DOPC's net profit in any fiscal year exceeds 5% of its equity. 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 Loan Agreement becomes effec- tive. Section 5.02. This Agreement and all obligations of the Bank, the Administrator and of DOPC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly so notify DOPC there- of. 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 herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -8- Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Administrator: Administrator of the Special Action Account (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) For DOPC: Ministry of Agriculture Monrovia Liberia 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 DOPC may be taken or executed by the Managing Director or such other person or persons as DOPC shall designate in writing, and DOPC shall furnish to the Bank and the Administrator 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. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused - 9 - 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Western Africa INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY By ByZVRegional Vice President Western Africa DECORIS OIL PALM COMPANY By Authorized Representative - 10 - SCHEDULE 1 Procurement A. International Competitive Bidding 1. Farm inputs (other than seed), vehicles, equipment, barge and port facilities estimated to cost the equivalent of $100,000 or more 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. Contracts for the palm oil mill (including buildings to house the mill) shall be let after limited international competitive bidding based on procurement procedures acceptable to the Bank aad after prequalification of potential suppliers. 3. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, DOPC 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 reason- ably 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. DOPC shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 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 imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to DOPC of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. - 11 - 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 Liberia 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 Liberia 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 Liberia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Liberia. (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 - 12 - 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. Contracts for farm inputs (other than seed), vehicles, equipment, barge and port facilities estimated to cost $20,000 equivalent or more but less than $100,000 equivalent and contracts for civil works (other than buildings housing the palm oil mill) shall be let after competitive bidding based on local advertising in accordance with the Borrower's procurement procedures accept- able to the Bank; provided that the aggregate amount of items so procured shall not exceed $1,500,000 equivalent. 2. Contracts for farm inputs (other than seed), vehicles, equipment, barge and port facilities estimated to cost the equiva- lent of less than $20,000 equivalent shall be let after direct competitive shopping; provided that the aggregate amount of items so procured shall not exceed $800,000 equivalent. 3. Seed requirements of the Project shall be provided under a negotiated contract satisfactory to the Bank. D. Review of Procurement Decisions by the Bank 1. Review of prequalification. DOPC shall, before prequalifi- cation is invited, inform the Bank in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifi- cations and of the reasons for the exclusion of any applicant for prequalification shall be furnished by DOPC to the Bank for its comments before the applicants are notified of DOPC's decision, and DOPC shall make such additions to, deletions from, or modifi- cations in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $100,000 or more: - 13 - (a) Before bids are invited, DOPC 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, DOPC 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 DOPC 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 delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, DOPC shall furnish to the Bank, promptly after its execution and prior to 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, recommendations 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 DOPC and state the reasons for such deter- mination. 4. 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 - 14 - issuing any clange 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, DOPC 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 Agree- ment, shall promptly inform DOPC and state the reasons for its determination. - 15 - SCHEDULE 2 Smallholder Selection Criteria and Credit Conditions 1. In selecting smallholders, DOPC shall give preference to persons: (a) resident in the village where the plantation is to be located; (b) engaged in agriculture as a main source of livelihood; and (c) having labor available to establish, maintain and harvest at least 2.5 hectares of oil palm. 2. Credit to be provided hereunder shall be made on condition that the Borrower shall: (a) follow DOPC's recommendations on cultivation, mainten- ance and harvesting techniques; (b) enter into an agreement with DOPC providing for a Loan for a period of 13 years including 6 years of grace during which interest will be capitalized and interest at 12.5% per annum; (c) offer land as collateral; and (d) agree to sell fresh fruit bunches to DOPC. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 1979. FOR SECRETARY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN' 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 J/ AW* day of 0doe±A, 197-9. FOR SECRETARY